From: Lindsey Cymbalisty - MVLWB To: Permits Subject: FW: Mattson Re-injection Date: Monday, February 06, 2012 3:31:29 PM Attachments: Borealis Mattson Re-injection MVLWB 2012.pdf Ft Liard Geology Report FINAL.pdf

Please post these two documents under MV2012L4-001 and MV2012X0001, Initial Application, Application and Related Documents. Please let me know when they are up, so I can send out a notice this afternoon.

Thanks, Lindsey

From: [email protected] [mailto:[email protected]] Sent: February-06-12 12:00 PM To: Lindsey Cymbalisty - MVLWB Cc: [email protected] Subject: Mattson Re-injection

Hello Lindsey

As a reference, our geothermal project design is a closed loop system; the geothermal production water remains securely behind pipe from production to injection. The water is produced and re- injected without any exposure to surface environment or potable water aquifers. However, in lieu of the Nation Energy Board not being involved with the Fort Liard Geothermal Project, I thought it may be helpful to address the use of the Mattson formation for re-injection of the geothermal production water. This formation has been used in the past for re-injection and I thought it may be accommodating to reference some of these wells and geological environment, and address any potential concerns. If you see it as helpful, I have attached a document that can be added to our file.

Any questions feel free to give me a call,

Happily going green,

Craig Dunn, P.Geol Borealis Geopower [email protected] #(403) 461 8802

February 5, 2012

Lindsey Cymbalisty Regulatory Officer MacKenzie Valley Land and Water Board 7th Floor, 4922 48th Street Yellowknife, NT X1A 2P6

Attn: MacKenzie Valley Land and Water Board Re: Geological Analysis on Re-injection for Fort Liard Geothermal Project

Borealis Geopower is currently working on the development of a smaller scale geothermal energy project in Fort Liard, NWT. The project would entail bringing cost effective electricity generation and direct heat opportunities to a native community that is currently producing its power from diesel generation. The Borealis Remote Geothermal Project will consist of a geothermal power plant with associated heat exchangers, a ~4,300m production well and ~1,500m injection well. This power and heat created will be completely ‘green’ and sustainable, with minimal emissions of any air pollutants or GHG’s, cover a small ground footprint and is expected to be indefinitely renewable.

The use of injection wells is common practice in the oil and gas industry as a method of disposing formation waters and reducing exposure of formation waters to surface environments. There are a number of economic and technical advantages to the re-injection of the formation fluids into a shallower formation; however, it requires that the injection formation can be categorized as a ‘containing reservoir’. A well-designed injection program will prevent formation waters from coming into contact with surface environment and local potable aquifers. There are two potential sources of contamination from the use of disposal wells: permeability between geological formations allowing vertical movement of fluids and the vertical movement along the well casing itself.

The use of the Mattson formation as a viable re-injection or disposal well is well recognized by both the National Energy board and BC Energy. The Mattson is a porous, high permeability sandstone zone with overlying low permeability shale zones within the Garbutt and Fantasque formations. This offers an ideal opportunity for water re-injection and the formation has already been used as water disposal for wells in the industry at multiple locations in the Liard Basin.

Wells that have been used for injection or water disposal into the Mattson formation include:

QUESTERRE BEAVER D- 064-K/094-N-16: This well in Northern BC dates back to 1957, but is currently in still operation as a water disposal well. It was pressure tested in 1998- the wellhead was serviced and injection capability confirmed.

QUESTERRE BEAVER B-A019-K/094-N-16: This well in Northern BC was also permitted as a water disposal well into the Mattson formation. From April 1999 to December 2012 there was 336,832 m3 of water injected.

DEVON KOTANEELEE YT M-17: This well within the Liard Basin in the NWT was also designated as a water disposal well. Formation top for the Mattson is 959.5m TVD (similar

Borealis GeoPower Inc. www.borealisgeopower.com Calgary, Alberta, Canada

depths to our drilling program for Fort Liard) and 382.5m of the Mattson were drilled (TD of 1332.0m). There are multiple drill stem tests and core samples run on this well. The full well report is available through the National Energy Board.

CHEVRON ET AL MCKAY LAKES 0-80: This well was spudded in 1999 (most recent) and is in close proximity to the Fort Liard Property. A full injectivity test was completed for this well. There is a clear shale zone greater than 100m thick in the Garbutt formation recognized in the wireline/gamma logging data set.

Fort Liard Project specifics:

The design of this project’s production and injection wells for geothermal power production is very similar in design to oil and gas development in the area. Formation (non- potable) water will be sourced from the Nahanni formation (~4,170m TVD to 4,320m TVD (True Vertical Depth) and is intended to be re-injected into the Mattson formation (705m TVD- 1460m TVD). All depths of formation tops were calculated from offsetting wells and seismic analysis. The Nahanni Formation is a vuggy dolomitic limestone and the Mattson Formation is a deltaic Quartzenite sandstone. The geological environment at the proposed geothermal drilling location at Fort Liard is well documented in Borealis’s “Fort Liard Geology Report” and references all the key formations that would be encountered with the drilling program.

The formation to be injected into is the Mattson and consists mainly of stacked fluvial, deltaic sandstone that is yellowish grey to pale red, submature to mature and siliceous to calcareous and dolomitic. Quartzenite dominates, but there are thin intervals of shale, limestone, dolostone, coal and chert. Based on extensive offset well analysis and available seismic data, the Mattson is approximately 755m thick; the top of the formation is estimated to be at 705m TVD and bottom of the formation is 1460m TVD.

One of the overlying low permeability zones, the Garbutt formation, is composed of dark grey shale and siltstone with sideritic concretions. There are two main divisions: a lower and an upper unit. The lower unit is composed of silty mudstone, argillaceous siltstone, sideritic concretions and a few thin seams of bentonite and has a glauconitic basal mudstone. The upper unit is mainly rubbly mudstone with rows of reddish brown weathering and has sideritic concretions. The upper beds include argillaceous siltstone and thin beds of laminated sandstone. As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 50-261 m, and has an average thickness of 140 m.

Directly above the Mattson is the Fantasque formation, which is rhythmically bedded and composed of spicular chert, shale and siltstone. A thin basal lag deposit of phosphate and chert nodules and pebbles exists in north-eastern British Columbia. As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 2-194 m, with an average thickness of 118 m.

These low permeability caps above our intended injection formation are expected to be thick enough to by far withstand any injection pressures induced by the injection well.

As for the risk of vertical movement of fluids along the well casing itself, this is the fundamental reason for extensive well design and strict drilling protocol to prevent cross- contamination between formations (including potable water aquifers and the surface environment). Borealis has acquired well design services from Codeco Energy Group to ensure

Borealis GeoPower Inc. www.borealisgeopower.com Calgary, Alberta, Canada

that our well design conforms to all required specifications as per National Energy Board (NEB) “ Drilling and Production Guidelines” (COGOA: Canada Oil and Gas Operations Act). If there is any uncertainty or gaps in these regulations for our specific drilling application, we will be following the more detailed ERCB (Energy Resources Conversation Board) regulations. An example of this is the “Director 008 Surface Casing Depth Requirements” for protecting groundwater with surface casing. Adhering to these extensive drilling regulations for well design and drilling procedures (including casing, cementing and pressure testing) is standard practice for all oilfield wells drilled in the Western Canada Sedimentary basin, including those in the NWT.

If there are any other questions regarding the well design or use of the Mattson as an injection reservoir please feel free to contact me directly.

Sincerely,

Craig Dunn, P.Geol. Chief Operating Officer: Borealis GeoPower #403-461-8802 [email protected]

Borealis GeoPower Inc. www.borealisgeopower.com Calgary, Alberta, Canada

ADK/Borealis Geothermal Energy Project: Geological & Geothermal Energy Resource Assessment

Submitted to:

Primary Author: Craig Dunn, P.Geol. Borealis Geopower Inc. August 24 , 2011

Contents

TABLE OF FIGURES ...... 3 EXECUTIVE SUMMARY ...... 4 INTRODUCTION ...... 6

PURPOSE...... 6 STATEMENT OF COMPETENCE ...... 6 PROJECT SUMMARY...... 6 EXPLORATION HISTORY ...... 8 LOCAL EXPLORATION OVERVIEW ...... 8 GEOTHERMAL RELEVANCE ...... 9

HOT SEDIMENTARY AQUIFERS...... 10 PROJECT HISTORY...... 12 OILFIELD WELL DATABASE FOR GEOTHERMAL RESOURCE ANALYSIS...... 13 Local Oilfield Database...... 13 GEOSCIENCE ...... 14 SURFICIAL GEOLOGY ...... 14 SUBSURFACE GEOLOGY...... 14 Structural ...... 14 Formation Analysis...... 15 POTENTIAL INJECTION ZONE...... 17 Mattson Formation (Mississippian; Lower Carboniferous) ...... 17 ZONE OF INTEREST...... 17 Nahanni Formation (Middle Devonian)...... 18 Manetoe Formation (Middle Devonian)...... 18 CROSS SECTION ANALYSIS...... 23 A-A’ ...... 24 A-B’...... 25 A-C’...... 26 D-C’ ...... 27 SEISMIC ANALYSIS...... 27 ESTIMATED FORMATION TOP DEPTHS AND ELEVATIONS ...... 29 FLUID FLOW ENVIRONMENT ...... 31 BOTTOM HOLE TEMPERATURE & GEOTHERMAL TEMPERATURE GRADIENT ...... 32 GEOTHERMAL GRADIENT CORRECTIONS ...... 33 GEOTHERMAL RESOURCE AND GEOTHERMAL RESERVES ESTIMATE ...... 35 INTRODUCTION TO CANADIAN GEOTHERMAL CODE FOR PUBLIC REPORTING ...... 35 GEOTHERMAL CODE – RESOURCE & RESERVES ...... 36 TEMPERATURE –DEPTH ESTIMATIONS ...... 39 CALCULATION OF THERMAL ENERGY POTENTIAL ...... 39 FORT LIARD GEOTHERMAL POTENTIAL ...... 40 ASSUMPTIONS, CAVEATS...... 41 CONCLUSIONS ...... 42

ADK/Borealis Geothermal Energy Project: Geological & Geothermal Energy Resource Assessment July 2011 Page 1

REFERENCES...... 42 APPENDIX A: GEOLOGICAL FORMATION ANALYSIS FOR RELEVANT UNITS...... 47

POTENTIAL ZONES OVERLYING THE ZONE OF INTEREST...... 47 Sikanni Formation- Fort St. John Group (Lower Cretaceous)...... 47 Lepine Formation (Lower Cretaceous) ...... 47 Scatter Formation (Lower Cretaceous)...... 48 Garbutt Formation (Lower Cretaceous) ...... 48 Spirit River Formation- Fort St. John Group (Lower Cretaceous)...... 49 Chinkeh Formation (Cretaceous) ...... 49 Toad Formation (Lower to Middle Triassic) ...... 50 Fantasque Formation (Permian)...... 50 Golata Formation (Mississippian) ...... 51 Flett Formation (Mississippian) ...... 51 Pekisko Formation- Rundle Group (Mississippian) ...... 52 Banff Formation (Uppermost Devonian)...... 52 Besa River Formation (Middle Devonian to Lower Carboniferous) ...... 53 Clausen Formation (Lower Mississippian)...... 54 Yohin Formation (Mississippian)...... 54 Exshaw Formation (Upper Devonian to Lower Carboniferous) ...... 54 Blackface Mountain Shale (Upper Devonian)...... 55 Kotcho Formation (Upper Devonian) ...... 55 Tetcho Formation (Upper Devonian) ...... 56 Trout River Formation (Upper Devonian)...... 56 Kakisa Formation (Upper Devonian)...... 57 Fort Simpson Formation (Upper Devonian) ...... 57 Muskwa Formation (Upper Devonian) ...... 57 Slave Point Formation (Middle Devonian) ...... 58 Watt Mountain Formation (Middle Devonian) ...... 58 Sulphur Point Formation (Middle Devonian) ...... 59 Pine Point Formation (Middle Devonian) ...... 60 Presqu’ile Formation (Middle Devonian) ...... 60 Muskeg Formation (Middle Devonian)...... 60 POTENTIAL ZONES UNDERLYING THE ZONE OF INTEREST ...... 61 Headless Formation (Middle Devonian) ...... 61 Landry Formation (Middle Devonian)...... 61 Arnica Formation (Early to Middle Devonian) ...... 62 Delorme Formation (Lower Devonian) ...... 63 Bear Rock Formation (Late Silurian to Middle Devonian) ...... 63 APPENDIX B: ADDITIONAL MAPS AND FIGURES ...... 64

ADK/Borealis Geothermal Energy Project: Geological & Geothermal Energy Resource Assessment July 2011 Page 2

Table of Figures Figure 1 - Fort Liard project proposed well site. Southwestern Northwest Territories...... 7 Figure 2 - Canadian Heat Flow Map, averaged in mW/m2 (Grasby, 2009)...... 9 Figure 3 - Geothermal map of Canada: Estimated Temperature at 3,500 m (Grasby, 2009)...... 10 Figure 4 - Generalized Diagram of Hot Sedimentary Aquifer Geothermal Project...... 11 Figure 5 - Stratigraphic chart of the Devonian to Cretaceous succession from the Liard region eastward across the southern interior plains (Morrow & Davies, 2001)...... 15 Figure 6 - Stratigraphic column of the Kotaneelee Gas Field (Morrow, 2005)...... 16 Figure 7 - Gas Field location map. Southwestern NWT/southeastern Yukon (Morrow, 2005)...... 20 Figure 8 - Pressure vs. elevation graph of subsurface fluids in the Middle Devonian aquifer (Morrow & Davies, 2001). The red circle indicates where the target formation falls...... 22 Figure 9 - Fort Liard Area Cross Section Lines...... 23 Figure 10 - Cross section A-A': wells K02-K36...... 24 Figure 11 - Cross section A-B': wells K02-J76...... 25 Figure 12 - Cross section A-C': wells K02-N80-P16...... 26 Figure 13 - Cross section D-C': wells F38-M25-P16...... 27 Figure 14 - NEB-obtained seismic lines for the Ft. Liard area...... 29 Figure 15 - Estimated depths and lithologies for the formations of the proposed well...... 30 Figure 16 – Diagram of an IPR curve...... 31 Figure 17 - Temperature gradients for offset wells deeper than 3 km TVD...... 33 Figure 18 - Temperature (C) versus depth (km) for corrected (red) and uncorrected (blue) temperature values...... 34 Appendix A Figure 1 - Regional stratigraphic chart and setting of the Manetoe Dolomite. "A" is behind the Slave Point edge and "B" is within the Selwyn Basin (Morrow, 2005)...... 62 Appendix B Figure 1 – Formation Pressures (psig) vs. Elevation (feet) graph (Ward, 1997)...... 64 Appendix B Figure 2 - IPR curve based on a 5-year analysis showing that the initial formation pressure starts at 6,300 kPaa, and has an initial drop within the first 6 months to 6000 kPaa (Fakete Engineering)...... 65 Appendix B Table 1 - Uncorrected and corrected temperature gradient data...... 66 Appendix B Figure 3 - Fort Liard area offset wells...... 67 Appendix B Figure 4 – Excerpt of the geological map of the Liard Basin including fault structures (Walsh, 2005)...... 67 Appendix B Figure 5 - Seismic time contour map for the Mid Devonian (Ocelot Energy, 1997)...... 67 Appendix B Figure 6 - Seismic time contour map for the Mid Devonian (Amoco, 1974)...... 67

ADK/Borealis Geothermal Energy Project: Geological & Geothermal Energy Resource Assessment July 2011 Page 3

Executive Summary

Borealis GeoPower Inc. (Borealis) has prepared this technical report in order to define the geological and geothermal resource environment for heat and electricity production at the proposed geothermal energy well site location just outside of the hamlet of Fort Liard, NWT.

Acho Dene Koe First Nation (ADKFN) is a band government of the Dene people, based in Fort Liard, Northwest Territories, Canada. The ADKFN support renewable energy projects that represent a cheaper source of heat and power, the opportunity to generate new revenue streams, and exert greater control over their own economic circumstances. ADKFN members have great respect for their traditional values and acknowledge the ADK/Borealis Geothermal Demonstration Project as a right step in reduction of Greenhouse Gas (GHG) emissions.

Geothermal (or Earth’s heat) energy is a clean, renewable source of both power and heat. It is proven technology that provides baseload (24 hours per day, 365 days per year) power, has low to no emissions and has one of the smallest environmental footprints per unit output of any power supply. It can be a practical energy solution for an entire generation of Canadians. Unlike other national energy resources like oil & gas, coal and wind, high temperature geothermal energy for electricity projection has yet to be developed as a resource in Canada. Detailed mapping and pilot projects for deep geothermal resources are required to aid exploration and project development, which currently lag far behind other countries on the Pacific Rim, including the US.

This project intends to show that there is another core resource in the NWT that can be constructively harnessed to provide both heat and energy to the residents, thereby improving their overall economic context. This power and heat project will be completely ‘green’ and sustainable, with near zero emissions of any air pollutants or GHG’s, and with proper project engineering the geothermal resource is expected to be renewable indefinitely. In addition to the combined heat and power project, significant scientific research will be performed, aiding in estimating the geothermal potential of Canada’s northern territories and how they might best be exploited.

The community of Fort Liard is located 25 km north of the British Columbia – Northwest Territories boundary and 38 km east of the Yukon – Northwest Territories boundary. This is within the traditional territory of the Acho Dene Koe people, which spans the border of B.C. and the Northwest Territories. Fort Liard is located on the southern tip of the Cordilleran Orogen and sits on the border betwee n the Cordilleran Orogen and the Interior Platform within the Liard Basin.

In the Fort Liard area, the source of heat from deep burial of sediments and radiogenic decay of basement rock, the porous and fractured nature of the sedimentary formations, the extensive fault systems, and the database of oil and gas wells are the key variables crucial to our understanding of the heat resource potential. The area of Fort Liard has higher than average temperature gradients ranging from 33⁰C/km – 49⁰C/km, which were calculated using offset wells of the Fort Liard area that are deeper than 3 km TVD (True Vertical Depth). The highest recorded bottom hole temperature in the area is 184⁰C at 4,728 m. There are nearly 50 oilfield wells within a 30 km radius of the proposed well site location. These wells provide a variety of information such as bottom hole temperatures, formation tops and drilling records. However, bottom hole temperatures can be underestimated due to the quality of the dataset and method of measurement from oilfield activities.

ADK/Borealis Geothermal Energy Project: Geological & Geothermal Energy Resource Assessment July 2011 Page 4

The Manetoe Formation is the main target, along with the Nahanni Formation, to be drilled to. The high pressure; porous, permeable and fractured environment; high water influx; and temperatures of the Nahanni and Manetoe formations make them desirable as a geothermal reservoir. Measured porosity of the Manetoe Formation in drill cores ranges from 0.5% to nearly 12% (Morrow & Aulstead, 2004). It has an average thickness within the formations in which it occurs (the Nahanni, Landry and Arnica) of approximately 200 m for the region surrounding Fort Liard (Morrow & Aulstead, 2004). The Mid Devonian regional scale aquifer which will act as the water supply experiences a low pressure decrease laterally, and thus the water influx can maintain pressure at the water contact consistent with the hydrodynamic pressure-depth relationship. The Manetoe Formation is an extremely desirable unit in terms of being a geothermal reservoir target for geothermal resource development.

With conventional binary turbine technology and standard geothermal drilling into the necessary heat resource (to depths of ~4,170 m, into the Nahanni and Manetoe formations in this area), the “indicated heat resource” in the area of Fort Liard is on the order of 6.34 x 1017 Joules of thermal energy in place as classified according to the Canadian Geothermal Reporting Code, relative to 70⁰C. At a total of 25 kg/sec flow rate and 1600C plant inlet temperature and assuming 15% thermal energy recovery and 9% electrical efficiency factor, the reservoir could produce recoverable and converted energy equivalent to 880 kWe and 9,800 kWth. At this rate of heat production for the reservoir volume of 3.75 km3, the geothermal reservoir would be sustainable for 310 years.

ADK/Borealis Geothermal Energy Project: Geological & Geothermal Energy Resource Assessment July 2011 Page 5

Introduction

Purpose

Borealis Geopower Inc. (Borealis) has prepared this technical report on the geological environment and geothermal resource potential of the area surrounding Fort Liard, in South-Western NWT. This document is in support of technical due diligence to ascertain the geological possibility of developing the geothermal resource for heat and electricity production at the proposed geothermal development at Fort Liard, NWT.

The report is structured to first provide relevant background data and then verify the geologic viability of a geothermal project in Fort Liard.

Statement of Competence

This report has been prepared by Craig Dunn and Ashley Gross. Mr. Dunn is a Senior Geologist with Borealis and has an Honours Bachelor degree in Geology from the University of Manitoba. He is a Member of the Association of Professional Engineers and Geoscientists of Alberta (APEGGA) and Borealis is a current corporate member of Canadian Geothermal Energy Association. Ms. Gross is a Project Geophysicist with Borealis and recently graduated with a Bachelor degree in Combined Earth & Ocean Sciences/Physics and Astronomy (Geophysics) from the University of Victoria.

Mr. Dunn and Ms. Gross been assisted by other key employees within Borealis, including Dan Yang and Tim Thompson. Dr. Yang, as a Qualified Person in terms of the Canadian Geothermal Code for Public Reporting takes responsibility and is accountable for the resource assessment of the report.

Project Summary

Acho Dene Koe First Nation (ADKFN) is a band government of the Dene people based in Fort Liard, Northwest Territories, Canada. The ADKFN support renewable energy projects that represent a cheaper source of heat and power, the opportunity to generate new revenue streams, and more control over their own economic circumstances. ADKFN members have great respect for their traditional values and acknowledge the ADK/Borealis Geothermal Project as a positive step in the reduction of GHG emissions. The extensive history of oil and gas drilling in the Fort Liard area assists in highlighting the geothermal resource potential at this location.

The location selected for the proposed well site (see Figure 1) is a brownfield site for Beaver Enterprise field operations and basecamp. It is a 0.27 x 0.21 km cleared, square piece of land sitting approximately 1.5 km east of the hamlet of Fort Liard, NWT at a latitude of 60.24N and a longitude of 123.43W. Fort Liard itself sits within the southwest bottom southwest corner of the region in the Liard Valley, on the banks of the Petitot and Liard Rivers. West of Fort Liard are the La Biche, Liard and Kotaneelee Mountain Ranges, and east is boreal forest. Fort Liard and the proposed well site both connect directly to the Liard Highway, thus allowing for easy transportation and access.

ADK/Borealis Geothermal Energy Project: Geological & Geothermal Energy Resource Assessment July 2011 Page 6

The hamlet of Fort Liard is a remote northern Canadian community that currently produces its power with diesel generators. This process of power generation is inefficient and expensive, thus for an area with a suitable and attractive geothermal resource potential, geothermal energy is a highly appealing and feasible alternative.

Figure 1 - Fort Liard project proposed well site. Southwestern Northwest Territories.

Geothermal (or Earth’s heat) energy is a clean, renewable source of both power and heat. It is proven technology that provides baseload (24 hours per day, 365 days per year) power, has low to no emissions and has one of the smallest environmental footprints per unit output of any power supply option. In principle, there is geothermal heat everywhere, including sedimentary environments; however, the cost of producing the heat resource to efficiently generate electric power using turbine technology can be economically prohibitive. The geothermal potential can be utilized only after the costs and risks of its development have been effectively understood. Geothermal power can be a baseload, renewable power solution for Northwest Territory’s objective of creating and maintaining a sustainable energy supply.

International geothermal energy development for electricity production has primarily been focused on areas of high geothermal potential associated with higher than average temperature gradient. The industry focus has been on larger scale (>20MW) development and production opportunities in hydrothermal rock formation. In contrast, the Fort Liard project is unique due to its small scale nature (700kW-1MW) and the project design is tailored to suit the needs of this remote northern community.

ADK/Borealis Geothermal Energy Project: Geological & Geothermal Energy Resource Assessment July 2011 Page 7

Exploration History

Local Exploration Overview

Traditionally, Fort Liard was used as a fur trading post by the Hudson’s Bay Company. The main industry today in the region is oil and gas, which is evidenced by the numerous wells located in the area. Extensive seismic surveying and drilling of wells has been carried out in the area due to the discovery of a once promising oil and gas play; however, due to a significant presence of water (a benefit in geothermal energy resource exploitation) these have become less desirable. The Beaver River Field, which is located 100 miles northwest of Fort Nelson on the Liard Plateau (Liard Fold Belt), was initially thought to be British Columbia’s largest gas field; however, increased water production reduced gas production by enough to cause the field to be shut down in October of 1978. The surveys and wells drilled for oil and gas exploration have provided an extensive suite of information that is necessary and a great benefit to exploring and defining the geothermal potential of the area.

These drilling and production datasets have helped to uncover geothermal energy potential and to pique interest in geothermal energy development in Canada’s northern remote communities. Information like bottom hole temperature, downhole porosity and water production are crucial to understanding the deep geothermal energy potential. This information is gathered during drilling operations and provides direct support for estimating the heat resource potential at depth and possible heat recovery. There are a number of oil and gas wells in the area surrounding Fort Liard which can assist with temperature gradient mapping, but it is important to recognize that temperature datasets were not taken with geothermal potential evaluation in mind. While the majority of this geothermal relevant information is available to the general public, some datasets are only available from private industry. Specific to the proposed well site area is the geological work done by major companies like Shell, Canadian Natural Resources Ltd, Amoco, Canadian Forest and Oil and Ocelot Energy to name just a few.

The Geologic Survey of Canada’s initial research into geothermal during the 1970s and 80s was also fundamental to the understanding of the resource potential in Canada. This dataset has recently been amassed and reorganized for easier mapping and data accessibility; this work was completed by Dr. Allan Jessop with the Geological Survey of Canada (Jessop, 2005). This dataset helped to map areas of interest, including the Fort Liard area, but it also references key research documents associated with the area (i.e. Jessop, 1991). Although many of the research documents were not written with geothermal exploration in mind, they contained valuable subsurface information relevant to heat resource mapping. Authors Morrow, Aulstead and Walsh have also contributed significantly to the research associated with geothermal resource potential in the Liard Basin with their work in oilfield reservoir analysis.

There has also been recent project development for geothermal energy resources in the Western Canadian Basin. Borealis is currently working with industry partners and the Alberta Government for the development of a geothermal heat and power project in the area of Swan Hills, Alberta. Internationally, there are projects in Germany, Australia and the US looking at the potential of developing geothermal energy resources from previously explored oil and gas sedimentary zones.

ADK/Borealis Geothermal Energy Project: Geological & Geothermal Energy Resource Assessment July 2011 Page 8

Geothermal Relevance

A geothermal resource requires three key variables: necessary heat resources, a permeable rock environment to transfer heat and a medium (usually water) to bring the heat resource to surface. A geothermal reservoir operates like an underground heat exchanger, therefore understanding heat flow and temperature gradient is fundamental to analyzing any geothermal resource. Injected water is circulated through the reservoir and is exposed to the surfaces of hot rock allowing it to remove heat. The rate of heat transfer – and, consequently, the final temperature that the fluid achieves – is related to the mass flow rate of fluid and the surface area the fluid contacts. In the Fort Liard area, the source of heat from deep burial of sediments and radiogenic decay of basement rock, the porous nature of the sedimentary formations, and the extensive database of oil and gas wells act as the key variables crucial to our understanding of the heat resource potential. Figures 2 and 3 show maps of the heat flow and the geothermal temperature distribution (at a depth of 3.5 km), respectively, across Canada. The concept of using sedimentary formations that overlie hot basement rock for geothermal energy development has been developed in other parts of the world and is commonly referred to in the geothermal industry as Hot Sedimentary Aquifers.

Figure 2 - Canadian Heat Flow Map, averaged in mW/m2 (Grasby, 2009).

ADK/Borealis Geothermal Energy Project: Geological & Geothermal Energy Resource Assessment July 2011 Page 9

Figure 3 - Geothermal map of Canada: Estimated Temperature at 3,500 m (Grasby, 2009).

Hot Sedimentary Aquifers

Geothermal reservoirs in sedimentary basins are often referred to as Hot Sedimentary Aquifers (“HSA”). In recent years, the geothermal industry has realized that some sedimentary basins contain attractive geothermal resources - zones which have medium temperatures (120oC to 160oC) and are permeable resulting in good fluid flow rates for geothermal energy production (80 kg/s to over 200 kg/s per well). Figure 4 shows a simplistic view of the cycle of heat and water from a geothermal reservoir as it is pumped up from the source through the drilled well to the surface where a turbine is used to generate power, and finally as it is pumped back down into the subsurface.

The Fort Liard project target geothermal reservoir is a limestone basin with an estimated temperature range from 140⁰C-180⁰C. The porous limestone environment lies within a massive, regional scale Middle Devonian aquifer that is capable of a flow rate of 30-40 kg/s. The resource is projected to produce between 700 - 1,000 kW of electrical power.

ADK/Borealis Geothermal Energy Project: Geological & Geothermal Energy Resource Assessment July 2011 Page 10

Figure 4 - Generalized Diagram of Hot Sedimentary Aquifer Geothermal Project.

Well known international examples of HSAs are:

The Great Artesian Basin in Australia is one of the world’s largest sedimentary basins and the source for Australia’s only geothermal power plant to date. The power facility at Birdsville, Australia is an operating facility and has a gross generation capacity of 120 kilowatt electricity (kWe). The plant uses water at 980C that is produced from a 1,280m deep borehole in an aquifer in the Eromanga Basin, one of the basins comprising the Great Artesian Basin.

There are also a number of other HSA projects moving forward in Australia. Areas within the Adelaide Geosyncline have been considered prospective by a number of companies including Torrens Energy Ltd, Planet Gas Ltd and Petratherm Ltd. Ongoing studies continue to suggest that deeper HSA targets are present and could be considered for development. Panax Geothermal Limited has also produced the first steam in early 2010 from their Salamander-1 well in the Otway Basin near Penola in South Australia; this is the first pure geothermal well in Australia to test a Hot Sedimentary Basin.

One project with many similarities to the development at Fort Liard is the Unterhaching Geothermal power plant; it is located south of Munich, Germany in the southern Molasse Basin. Two wells (3,446 m depth) were drilled beginning in 2004, and initial production commenced in 2007. These wells access hot water (123°C) from the Jurassic Malm limestone. Apart from providing district heating needs via a 28 km pipeline for a capacity load of 3,000 homes, the wells also feed hot water into a Kalina

ADK/Borealis Geothermal Energy Project: Geological & Geothermal Energy Resource Assessment July 2011 Page 11

Cycle power plant—the first such plant in the European Union—to produce 3.4 MWe. The success of the Unterhaching geothermal plant is largely based on the achievement of a sustainable flow rate of 135 kg/s from the production well, facilitated by large Baker Hughes pumps.

As fluid flow can be a major obstacle to overall heat extraction in geothermal projects, one method to increase both in place water and permeability is hydraulic stimulation of the cleavages and fissures. Fracturing, a well-established procedure in the petroleum and natural-gas industry, is a technique where fluid is pumped into the well at pressures high enough to fracture the formation. Developed in the 1940's and continuously improved, it is employed there to increase the productivity of oil and gas wells. Hydraulic fracturing is increasingly playing a key role in the exploitation of geothermal heat. In this way, the natural water throughput of the reservoir rock can be increased through active stimulation to the point that geothermal energy production becomes more economically viable. One example of this is the Landau geothermal plant in the Rhine Graben which has successfully pioneered developing geothermal projects in tight sedimentary formations. In 2007, the plant commissioned a 3 MW electricity plant using pumped water of 158°C from the production well at 3,300 m. In this case, the reinjection well was stimulated via hydraulic fracturing to achieve flow requirements. The production well has an estimated flow rate of ~65 kg/s, with a planned output of 80 kg/s. The target zone for the Fort Liard area is a porous limestone and dolomite formation; therefore, while hydraulic fracturing is unnecessary in this environment, there is the possibility of using acid stimulation to increase fluid flow.

Project History

In April 2009, Borealis partnered with the Acho Dene Koe First Nation (ADK), the resident First Nations band in Fort Liard, to file an application to the Clean Energy fund. The application was for funding for a Combined Geothermal Heat & Power [CHP] to supply the Hamlet of Fort Liard with renewable, emission and noise free geothermal energy. This small scale geothermal energy project was designed to bring cost effective electricity generation and direct heat opportunities to a native community that is currently producing its power from diesel generation. Beyond the price point and inefficiencies involved with electricity from diesel generators, there are also a number of concerns regarding its non-renewable and polluting nature.

Significant work was performed to prepare the preliminary project design and submit a joint application to the Clean Energy Fund (CEF) in September 2009. The proposal received letters of support from a number of key organizations: Indian and Native Affairs Canada (INAC), Northwest Territories Energy and Natural Resources (NWT ENR), Northwest Territories Power Corp (NTPC) and the Canadian Geothermal Energy Association (CanGEA). In total, the project was to be financed through a combination of government incentives, private equity, and community participation.

The preliminary project design was to consist of a geothermal plant which will deliver a minimum of +/- 1 MWe (sufficient for ~750 homes or the entire community) and also +/- 1 MWth, sufficient to operate a local greenhouse complex.

The subsequent project design will require constructing two conventional vertical wells (one production and one injection), and a binary surface power production facility. The project is to be located near Fort Liard in the Northwest Territories, taking advantage of geothermal features that suggest a potential heat reservoir sufficient for power and heat generation. The project is expected to come online late 2012/early 2013. This project intends to show that there is another core resource in

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the NWT that can be constructively harnessed to provide both heat and power to its residents, thereby improving their overall economic context. In addition to the combined heat and power project, significant scientific research will be performed aiding in estimating the geothermal potential of Canada’s northern territories and how they might best be exploited.

In January 2010, the ADK/Borealis Geothermal Energy Project was approved for potential funding between $10-20 Million (up to 50% of actual project costs) by the Natural Resource Canada’s Clean Energy Fund (Renewable and Clean Energy Demonstration Projects). On many fronts, Borealis & the ADK began to coalesce and formalize earlier arrangements and have agreed a partnership agreement permitting the project to move forward in Fort Liard. Since January 2010, Borealis, in conjunction with the ADK, have worked to involve all the key parties involved with the project including NTPC, NWT ENR, potential partners and NWT Industry, Tourism & Investment (NWT ITI). In June 2010, with the support of the NWT ITI, the Provincial government expressed interest in being involved as a financial partner in the project. To support technical briefing notes for the minister’s office, Borealis prepared an earlier technical report highlighting the details of the geothermal resource potential, location screening and selection tools and geothermal project checklist of development.

In support of the ADK/Borealis Project, there has also been an increased interest and research into NWT’s geothermal energy potential. NWT ENR recently tendered a project to develop a “geothermal favourability map” to encourage further development of the resource. The creation of user-friendly GIS (Geographic Information System) favourability maps and layers of key geothermal attributes has helped geothermal energy researchers and developers with exploration programs in other areas worldwide, including the Great Basin in the US. Recently completed, this research highlights the opportunity for geothermal energy development in the NWT and the geothermal potential of the Fort Liard community.

For project specific details an extensive geological review is necessary. This report was requested to verify the geologic viability and to document the geologic research supporting geothermal development.

Oilfield Well Database for Geothermal Resource Analysis

Local Oilfield Database

There are over 40 oilfield wells within a 35 km radius of the proposed well site location for the Fort Liard project providing a variety of information like bottom hole temperatures, formation tops and drilling records. Numerous wells have been drilled for oil and gas production due to the promise of a vast oil reservoir within the Devonian formations; however, water coning caused a considerable depletion in gas production. Few of the wells are still currently producing but most are suspended or abandoned. Appendix B Figure 3 shows the names and locations of all of the relevant offset wells.

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Geoscience

Surficial Geology

The location of the proposed well site for Fort Liard sits within the Liard Basin on the Great Slave Plain and just east of the Liard Plateau. The proposed well site is just ~1.5km east of Fort Liard, which sits at the confluence of the Lard and Petitot Rivers. The area is generally flat on a broad river terrace with the La Biche, Liard and Kotaneelee Mountain Ranges of the Franklin Mountains to the east. The climate of the area includes a mean temperature of 22.7⁰C in July and -20.2⁰C in January, with an annual average of -1.2⁰C.

Subsurface Geology

Structural

The major structural regions proximal to the Fort Liard area are the Liard Fold Belt, Liard Basin, Bovie Fault Zone and the Northern Plains. The Liard Fold Belt is the southward-plunging extension of the Mackenzie Mountains with an eastern limit of the western edge of the Liard Basin and Beaver River- Kotaneelee-Pointed Mountain structural trend. The western and northern limits are distinguished by the outcrop of the prospective zones within the Mackenzie Mountains.

The Liard Basin is a north-south trending basin that was formed during the late Cretaceous to early Tertiary and straddles the B.C., Yukon and Northwest Territories borders. It extends to the north- trending Bovie Fault Zone to the east, to the Rocky Mountain Foothills to the southwest, and to the Liard Fold Belt to the north/northwest.

The Bovie Fault Zone is an important structural feature that separates a thicker Paleozoic-Mesozoic succession in the Liard Basin from a thinner succession in the interior plains. The Bovie Fault extends deeply from 59⁰00’N northwards to about 61⁰00’N, at a longitude coincident with 123⁰00’W. Movements on the fault affected thicknesses, facies boundaries, and distributions of adjacent sediments.

The Northern Plains extend east from the Bovie Fault Zone and extend across northeastern B.C. and southwestern Northwest Territories.

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Formation Analysis

The subsurface geology is crucial to geothermal reservoir qualities such as the flow rate, pressure and temperature necessary for successful project design and longevity. Significant formation analysis has been completed by authors like Morrow and Walsh. Following is a summary of the key zones, in approximate order with depth, that drilling may encounter. These formations were identified by their occurrence in the offset wells that surround Fort Liard. See Appendix Figure 2 for a map of all of the offset wells. This list represents a full and comprehensive inventory of the likely formations that will be encountered, those of which occur in Figures 6 and 7, which show their relative spatial relation to one another. While Figure 7 illustrates Morrow’s general interpretation of the stratigraphic column of the Kotaneelee gas field (an area adjacent to and west of Fort Liard), it does not include all of the formations found in our geological formation analysis.

Figure 5 - Stratigraphic chart of the Devonian to Cretaceous succession from the Liard region eastward across the southern interior plains (Morrow & Davies, 2001).

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PERIOD/ FORMATIONS (Kotaneelee Field) E - nu .ov

I I t;t< riARY

t- ...... ~ ...... ""' ...... ~ ~ ...... :·· ~ ~ en ~ r- -::_ -::_ -:cJ5.v~ AI - - .,- - - .,- :::l ~ ''"" ...... ~ 0 -:::- ..... - -...,. - w - uur'! (.) SullY I ··: Sikan_nj :·: :-· . w~ ,., Fort St. -' c:: '\:; John Group (.) Cll ''. w (

, _ ~ ,• ..:...... '-[ .• ~· ·: ' •.

JURASSIC$ -- - - - TRIASSIC --- Toad·Grayf1ng ~ ~ ~ .--.. ..-. ..-.. -~-- -...-.~~ ,.·.·.. ·. ·.·-~- · t ·::.·.·.·--.~.-~ PERMIAN~ llJllLUJTUlJij.IJ..ITIWTIWJTU.UI .llnnulTlll mu ':"' . . . - . . . ~ ~ · . ~ : · ·. · · · .. Mt~tt~on : . 0 - ffi It Golata LL ~ (I) z =~ ~ g ~ ~ ~ >. ~ ·- u - Besa R•ver (upper) - - r: . ~ ...... A. - - G> 3 Besa River {IQYier) - z Horn~ IHC • end Sull ~ G> z ~ WF' '~r:.r:"~~!~!fl 0 ~ ~ ~h2?~:?~~0 Gi 1/7/--''.:.- =---~:.r ~ :Y.Z~E-~r. 1:.?/, 0 ~co Arnica w ,..., · ~ ~I" '. ..;;. ~- Mount K.ndle ? Figure 6 - Stratigraphic column of the Kotaneelee Gas Field (Morrow, 2005).

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Potential Injection Zone

Mattson Formation (Mississippian; Lower Carboniferous) This formation has been selected as the potential reinjection unit where water pumped from the Nahanni and used to produce power will then be pumped back down into this formation.

Offset Well Occurrence This formation occurs in 52 wells of the Fort Liard area.

Geology This formation consists mainly of stacked fluvial, deltaic sandstone that is yellowish grey to pale red, submature to mature and siliceous to calcareous and dolomitic. Quartzenite dominates, but there are thin intervals of shale, limestone, dolostone, coal and chert.

There are three informal members: upper, middle and lower. The upper member is largely chert- arenite and sub-chert-arenite that contains both fining and coarsening upward sequences that resemble underlying members, but contain intervals of ooid to skeletal limestone and dolostone. This member is partially separated from the middle member by a basal carbonate unit. The middle member has shale and thin coal seams that predominate. This member unconformably overlies and passes south- westward into the lower member. The lower member is composed of mainly coarsening upwards sequences of bioturbated to cross-bedded sandstone with subordinate shale. Sandstone and siltstone turbidites are predominant south-westward.

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 20-1,482 m, with an average thickness of 794 m. The formation extends from 50⁰30’N to 61⁰30’N and is preserved in the northern Rocky Mountain Thrust Belt, southern Mackenzie Fold Belt and western Cratonic Platform and is mainly preserved as a down-faulted succession west of the Bovie normal fault system. It is widely distributed in north-eastern British Columbia, south-western District of Mackenzie and southeast Yukon. East of the Bovie fault the unit is generally less than 40m thick with a maximum thickness of 1,410 m at Tika Creek (NTS 95C/10) near the Yukon/District of Mackenzie border and thins gradually south-westward from Tika Creek and southward from 60⁰00‘N.

The formation is overlain by the Fantasque formation and conformably overlies and grades basin- ward into the Golata formation in the northeast, and the Besa River formation to the southwest (where the Golata is not recognizable). The Permian Kindle Formation unconformably overlies most of the Mattson and north-eastward it is unconformably overlain by the Cretaceous Ft. St. John Group.

Relevance Due to the proximity of the occurrence of the formation to the location of the proposed well and the amount of wells that the formation occurs in it is expected that this formation will be ~755 m thick and provide a significant opportunity for re-injection.

Zone of Interest Together the Nahanni and the Manetoe formations comprise the zone to be targeted as the geothermal reservoir. The Manetoe exists within the thick, limestone Nahanni Formation and constitutes sections of porous and fractured post-lithification replacement dolomitized Nahanni. The

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high porosity, permeability, highly fractured environment, high water influx and temperatures make these formations highly desirable as a geothermal reservoir.

Nahanni Formation (Middle Devonian) Offset Well Occurrence This formation occurred in 53 wells of the Fort Liard area.

Geology This formation is composed of a dark grey, resistant, well-bedded, finely crystalline, dense and bioclastic limestone, remarkably uniform in thickness at about 215 m; however, it may thicken to 460 m near the line of facies change to the Headless shales. The formation is more argillaceous near the base. The depositional environment was an open marine, shallow water shelf.

“The transition between undolomitized and dolomitized Landry, Headless and Nahanni limestones is well exposed at Nahanni Butte and near Ram River north of Nahanni National Park,” (Morrow & Aulstead, 2004).

The fluid type of the formation is hypersaline brines of seawater evapouritic origin, most likely generated during the precipitation of the Middle Devonian evapourates of the Elk Point Basin (Morrow & Aulstead, 2004). The fluid transport involves subsurface thermal convection driven by fluid buoyancy.

As directly measured in the wells of the Fort Liard area, the range of thickness of this formation is from 35-137 m and it is known to thin to the east.

The Nahanni overlies the Headless Formation, and, combined, the Headless and Nahanni formations are equivalent to the Hume Formation. The lower contact with the Headless Formation becomes younger westward. The Nahanni Formation changes facies to shales of the Headless in the west and may correlate with Dunedin Formation of north-eastern British Columbia. The uppermost beds of the Nahanni most likely intertongue with the lowermost shales of the Besa River Formation (Morrow & Aulstead, 2004).

Relevance The Nahanni Formation is a major formation and one of two members of a coexisting package (consisting of the Nahanni and Manetoe formations) that comprise the targeted geothermal resource. As it is the target it is fully expected to be encountered by drilling and is expected to be encountered at a depth of 4,170 m, which translates to a subsea elevation of approximately -3,950 m.

Manetoe Formation (Middle Devonian) Offset Well Occurrence This formation was only encountered within 2 of the offset wells surrounding Fort Liard, however, it is known to be a post-lithification replacement of the limestone Nahanni Formation and so occurs within that formation and is assumed to occur more frequently than what was observed in the offset wells.

Geology This formation is composed of dolomitized equivalents of the Landry, Headless and Nahanni carbonate formations and is a product of diagenetic hydrothermal dolomitization. The specific lithology is white, coarsely crystalline, extremely porous, sparry, fractured and brecciated dolospar and replacement dolomite. It is characteristically thick-bedded to massive and includes interbeds of medium

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grey, dark grey to black cryptograined limestone as much as 1.25 m thick. Bioclasts are commonly preserved as white dolospar-cemented molds, or as open vugs with many cemented vugs containing probable geopetal internal sediments (Morrow & Aulstead, 2004). The distinctive curved crystal faces attributed to “saddle” dolomite are commonly displayed within white dolospar within incompletely cemented vugs (Morrow & Aulstead, 2004).

Original lime packstone and wackestone sediment textures are apparent petrographically and finely comminuted skeletal material is preserved, as well as depositional bedding textures such as nodular bedding (Morrow & Aulstead, 2004). “Mesoscale fabrics include white dolospar-cemented mosaic and rubble breccias associated with some poorly sorted internal, silt to gravel-sized, carbonate sediment,” (Morrow & Aulstead, 2004).

In the belt along which the Kotaneelee, Pointed Mountain, Beaver River and Liard North and South gas fields (locations shown in Figure 8) exist, the Manetoe is shown to occupy the Landry to the top of the Nahanni interval. The average thickness of the Manetoe Dolomite within this area and these formations (combined) is approximately 200 m (Morrow, 2004).

Measured porosity in drill cores range from 0.5% to nearly 12% (Morrow & Aulstead, 2004). Present-day porosities of the Manetoe Dolomite and Nahanni limestone in cores from the gas fields are consistent with depth-dependent burial porosity loss accompanied by occlusion of porosity by mineral cements (calcite and quartz) and bitumen. Additional porosity loss may have occurred from more time- dependent processes such as stylotization. Late-stage fracture porosity is not pervasive and is not present in most cores.

Permeability (particularly vertical) has been enhanced by dolomitization, except possibly in cases where pre-dolomitization porosity and permeability was high. There is a crude, but positive correlation between measured porosity and horizontal permeability, which can be as much as 30 D, but is more typically about 10-100 mD (Morrow, 2005).

Heterogeneities have been superimposed on this unit by a large amount of diagenesis and tectonic alteration. The Middle Devonian carbonate has no primary porosity and permeability, therefore without the secondary porosity and permeability created by tectonism would not be a reservoir rock. Reservoir bitumen that completely block pre-bitumen macroporosity of the Manetoe Dolomite could represent the products of thermal cracking. The deformation style of the carbonate is highly variable and thus two distinct fracture types were caused to be superimposed, giving a complex fracture system that depends on position within the fold.

Contact between the Manetoe and underlying Arnica Formation is distinct but gradational. In the region of the Kotaneelee Field (see Figure 8), the Manetoe Dolomite is restricted to strata beneath the top of the Nahanni Formation by the Horn River/Besa River shale (Morrow & Aulstead, 2004). Farther west and north the Manetoe Dolomite is restricted to Landry strata beneath the shaly limestone of the Headless Formation while east and south of the Kotaneelee Field it merges with the Presqu’ile Dolomite of the southern Northwest Territories (Morrow & Aulstead, 2004).

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Figure 7 - Gas Field location map. Southwestern NWT/southeastern Yukon (Morrow, 2005).

The Manetoe Formation constitutes important gas reservoirs within the Kotaneelee Field. Hydrocarbon generation and migration occurred after the dolomitization that occurred to form the Manetoe.

Pyrobitumen coats vug linings and even fills some vugs, while palisades of saddle dolomite lining unfilled vugs are typically coated with black reservoir bitumen whose emplacement post-dated dolomitization (Morrow & Aulstead, 2004). It was observed that blocky, equant calcite and/or quartz, where present, had a tendency to fill vug centres following bitumen emplacement (Morrow & Aulstead, 2004). Disseminated, post-dolomitization orange sphalerite (ZnS) is common with isolated blebs of galena (PbS) occurring in most wells, commonly as post-dolomite vug fillings (Morrow & Aulstead, 2004).

Geochemistry Morrow & Aulstead (2004) found that the white, cavity-filling dolospar in the Kotaneelee Field is stoichiometric, well ordered dolomite with 50±1 mol% CaCO3, whereas the light to dark grey replacement dolomite is only slightly less stoichiometric with about 51 mol% CaCO3. They also found that iron is the most abundant trace element and is present in concentrations of less than 0.5 mol% while other trace elements analyzed (Mn, Sr, Zn, Cu and Ba) are present in concentrations less than several hundred ppm (Morrow, 2005).

10 samples of the Manetoe Dolomite showed that the strontium isotopic ratio (87Sr/86Sr) ranged from 0.70802 to 0.71282 (Morrow & Aulstead, 2004). All of the white dolospar samples were greater

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than 0.70945, whereas the grey Manetoe replacement matrix dolomite samples were all less than 0.70918 (Morrow, 2005), suggesting that the white dolospar has experienced less interaction with geothermal fluids than the grey dolomite.

Primary fluid inclusions observed to be two-phase, aqueous and liquid-vapor-filled occur in white dolospar cements of the Manetoe Dolomite and have uncorrected homogenization temperatures ranging from 150° to 195° C (Morrow & Aulstead, 2004). These primary two-phase aqueous inclusions have initial melting temperatures (Te) ranging from –58.9° to -53.4° C and final melting temperatures (Tm) of –29.4° to -19.3° C (Morrow, 2005).

Dolomite cements were shown to exhibit very dull orange cathodoluminescence with little to no zonation. Dull orange luminescence with little indication of recrystallization following initial dolomitization of calcite was exhibited in the finely to medium crystalline matrix (Morrow, 2005).

Dry gas wells (ie- no oil content) K-29 and M-25, which are around 25 km northwest of Fort Liard, show measurements of approximately 20% CO2 and 0.5% H2S. The reservoir conditions at these wells show a pressure of 28000 kPa and a temperature of 156°C (Goodfellow and Barr, 2001).

Water Influx/Coning Although initial gas production rates in all Manetoe Dolomite reservoirs were extremely high, they experienced progressive loss of gas production by water coning (Morrow & Aulstead, 2004). Water influx from the underlying Middle Devonian confined high pressure system accompanied the production of gas from the open fracture system which resulted in sealing gas in more poorly communicating vuggy Nahanni carbonates. Within 6 months of initial gas production (which had rates of more than 5.5 mln m3/d), testing showed that wells displayed high water/gas ratios of about 45,000 m3/(mln m3) (Davidson and Snowdon, 1978), resulting in 250,000 m3/d water production.

The first evidence of water production from the formation was the increased chloride content of produced water caused by comingling of saline formation water with fresh condensed water. Thus, water production from the aquifer was indicated by the immediate increase of measured salinity, even though an increase in water/gas ratio was not seen for 1 to 3 months. Subsequent recompletions and computer modeling (as well as actual field observations) demonstrated that water coning was an insignificant factor and that water influx (or bottom-water drive) across the entire reservoir through the fracture system was responsible for water production.

The water intrusion was attributed to an influx of water into a “two-porosity” (matrix and fracture- vug porosities) gas reservoir system in which vuggy carbonates contain numerous vertical and horizontal fractures. Rapidity of the differential water influx is due primarily to:

1) Pressure drive of the water influx: water pressure at the gas-water contacts in these gas fields is a function of the difference in elevation between the Middle Devonian aquifer potentiometric surface and the elevations at the gas-water contacts themselves. This difference in elevations is greatest (4084 metres) at the Beaver River and Kotaneelee gas fields. (Morrow & Davies, 2001)

2) Porosity-permeability distribution of the reservoir; the Manetoe Dolomite is a post- lithification replacement of low porosity open marine shelf lime mudstones and wackestones of the Nahanni. Porous stromatoporoidal patch reefs occur at the top of dolomitized Nahanni in

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some gas fields. Zones of tightly cemented dolomitized mosaic and rubble breccia occur infrequently. Surface exposures of the Manetoe Dolomite show that fossil hydrothermal masses several kilometers broad are encased with non-porous Nahanni-Headless limestone, suggesting that solution excavation of these limestones was contemporaneous with dolomitization. (Morrow & Davies, 2001)

Over a distance of 137 km from the Beaver River system to the outcrop of the Nahanni/Manetoe in the canyons of the South Nahanni River, the aquifer elevation increases by 3.962km. This high amount of relief in the aquifer leads to rapid water influx as depletion of the reservoir occurs. Also, the relatively short distance to the outcrop causes a low pressure decrease in the aquifer and, thus, the influx can maintain pressure at the water contact consistent with the hydrodynamic pressure-depth relationship (Davidson and Snowdon, 1978).

There is a high degree of communication with the outcrop which is indicated by relatively low salinities (30 000ppm) in Beaver River wells. Advective heat flow was likely because of the high fluid inclusion homogenization temperatures relative to burial at depth at time of dolomitization (Davidson and Snowdon, 1978).

Figure 8 - Pressure vs. elevation graph of subsurface fluids in the Middle Devonian aquifer (Morrow & Davies, 2001). The red circle indicates where the target formation falls.

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From this chart, the static pressure in our zone is very high at ~6,300 psig (43,000 kPa), thus showing that the reservoir is over-pressured with respect to hydrostatic conditions.

Relevance The Manetoe Formation is an extremely desirable unit in terms of being a geothermal reservoir target for geothermal resource development. It is the post-lithification replacement dolomite of the Nahanni Formation, which is an extensive and uniform unit within which the Manetoe exists. The Manetoe Formation is the main target, along with the Nahanni Formation, to be drilled to.

Cross Section Analysis

Cross sections were created from well data of offset wells surrounding the proposed well site in Fort Liard. This data was obtained through GeoLOGIC’s Geoscout program and was used to observe and demonstrate the characteristics and trends seen in the region’s subsurface formations, as well as to identify anomalies and their approximate locations. See Appendix Figure 3 for a plan map of all the locations of the cross sections, as well as Appendix Figures 4-7 for all cross section images. This cross section analysis was correlated to previous research done with fault structures and offsetting wells (Walsh).

Figure 9 - Fort Liard Area Cross Section Lines

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A-A’

This cross section has a NE-SW direction and connects the PARAMOUNT ET AL MCKAY LAKES K-36 and CDN FOREST ET AL MOUNT COTY 2K-02 wells (see Figure 10). It demonstrates the general eastward thinning trend of the top formations (Scatter to the top of Flett), as well as their general upward-dipping inclination towards the northeast (rising by an average of ~192m).There is a known thrust fault system running N/NW-S/SE between these two wells which is the cause for part of the rise in height on the northern side of the fault (see Appendix B Figure 4).

Figure 10 - Cross section A-A': wells K02-K36.

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A-B’

This cross section has an E/NE-W/SW direction and connects the CDN FOREST ET AL MOUNT COTY 2K-02 and PARAMOUNT ANADARKO BOVIE J-76 wells (see Figure 11). It demonstrates an obvious rise in elevations of the lower formations (starting at the top of Flett, and includes the formations of interest: the Nahanni and Manetoe). This rise in height is due to having crossed numerous thrust faults that exist between these wells and have a mostly N-S direction. The location of the faults have been confirmed through seismic analysis.

The jump in elevation experienced by the lower formations averages to ~1,400 m, with the Nahanni formation rising by 1,520 m between these two wells (from an elevation of -4,104.0 m to –2,583.7 m). To the east of the fault there are three wells clustered together (including the J-76 well) which show the Nahanni formation to have risen by an average of 1,532 m.

Figure 11 - Cross section A-B': wells K02-J76.

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A-C’

This cross section connects three wells (from south to north): CDN FOREST ET AL MOUNT COTY 2K- 02, CHEVRON ET AL MCKAY LAKES 0-80 and CNRL LIARD P-16 (see Figure 12). Between the 2K-02 and O- 80 wells it has a N/NE-S/SW direction, and then jogs and has a NW-SE direction between the O-80 and P- 16 wells. It, like cross section A-A’, demonstrates the general thinning trend of the upper formations (Scatter to the top of Flett). The cross section also shows a rise in elevations of all of the formations as the cross section proceeds northwards; regional structural analysis has shown that this is due to a southward-dipping anticlinal structure. The fault mentioned in the A-B’ cross section analysis is also known to cut between the K-02 well and the N-80 and P-16 wells, thus being responsible for a portion of the gain in elevation of the formations.

Figure 12 - Cross section A-C': wells K02-N80-P16.

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D-C’

This cross section connects three wells (from east to west): AMOCO POINTED MOUNTAIN (B-2) F- 38, PARAMOUNT ET AL LIARD 2M-25 and CNRL LIARD P-16 (see Figure 13). This cross section best illustrates the anticlinal structural feature existing within this region between these wells.

Figure 13 - Cross section D-C': wells F38-M25-P16.

Seismic Analysis

The seismic data and interpretations used in this report were obtained through the NEB (National Energy Board), and analysis was carried out by Gerard Dobeck in conjunction with Borealis. The lines obtained include:

 5550962- Amoco Canada Petroleum Company Ltd. . HDHA00002 . HDHJ00006 . HDHJ00007  5553726- Northcor Energy Ltd. . NEL-4 . NEL-7  5550578- Shell Canada Resources Ltd. . JA000200266F01 . JA000200267F01 . JA000200268F01

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 5553586- Shell Canada Resources Ltd. . AT00701368 . AT00701370  5553617- BFR Geophysical Consultants Ltd. . MR-97-2  5553665- Explor Data Ltd. . A00P-LIA-01  5553772- Shell Canada Resources Ltd. . A006800087  5553665- Canadian Forest Oil Ltd. . FTL-51

See Figure 14 for a plan map of all of the seismic lines used for this analysis.

Two seismic timing contour maps for the Mid Devonian formations: one produced in 1997 by Ocelot Energy (see Appendix B Figure 5) and one produced in 1974 by Western Geophysical Company (see Appendix B Figure 6), along with offset well true vertical depth values were used to conduct an analysis of the seismic velocity at the location of the proposed well site.

Three wells (K-02, C-76 & J-76) which reach the Nahanni and exist within the borders of the Ocelot map (see Appendix B Figure 5) were used to obtain the True Vertical Depth to the Nahanni Formation. The seismic time contours on the Ocelot map were then correlated with the given Mid Devonian formation tops (Nahanni) at the three wells. Using the seismic time contours and the offset wells depths, the velocity at the proposed well site was estimated thus enabling the calculation of the depth to the Nahanni formation top. Using the Western Geophysical map, a conversion (50 ms ≈ 310 ft.) was already provided and allowed for the direct calculation of the depth to the Nahanni formation top. These calculations showed that the approximate depth to the Nahanni Formation is 4,170 m TVD for the more recent Ocelot map and 4,270 m for the older Western Geophysical map. These numbers correlate well with previous estimations from other data sources.

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The seismic data was shown to correlate very well with the offset well data and the generated cross sections. Thus, by analyzing the seismic data, this helped to verify the information which had already been gathered from the well data.

Figure 14 - NEB-obtained seismic lines for the Ft. Liard area.

Estimated Formation Top Depths and Elevations

The hamlet of Fort Liard sits at 220 m above sea level, thus, assuming this same elevation for the Fort Liard project proposed well site location, the following formation top depths and elevations have been estimated. The estimations were arrived at by considering formation top elevations and average formation thicknesses from offset well data, cross sections created in geoSCOUT, structural contour maps, contour maps created in ArcGIS and seismic contour maps from the NEB obtained seismic data. These estimates include an error of ± 100 m.

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Figure 15 - Estimated depths and lithologies for the formations of the proposed well.

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The formation tops appear well correlated with the seismic and offset well data as well as log data from the Jayhawk/Sproule report (Chipperfield et al., 2009).

Fluid Flow Environment

Exploration for gas fields in the Liard Basin has revealed that the Nahanni Formation, and specifically the Manetoe Dolomite, is a well extensive aquifer with significant fluid flow to the North east. Drilling for gas in the Beaver River, Kotaneelee and Pointed Mountain fields has shown that initial gas production rates in all of the Manetoe Dolomite reservoirs were extremely high; a total of 315 BCF (8.92 bln m3) has been produced from the thrusted and fractured Middle Devonian Nahanni Dolomite reservoir in the period 1972-2001. However, these wells are subject to progressive loss of gas production by water coning (Davidson and Snowdon, 1978). Morrow et al. (1990) estimated that the Manetoe extends across 38,000 km, and that this belt of thick Manetoe is more than 100 km long and at least 30 km wide. The average thickness of the Manetoe within this belt is about 200 m for a total Manetoe volume of about 600 km3 along this trend.

A hydrodynamic analysis of the Liard Arch by Ward (1997) involved a comprehensive integration of the pressure, fluid chemistry and formation temperature data for the Nahanni formation. A total of 408 Drill Stem Tests (DST), 85 gas analyses and 232 water analyses were examined and an interpretation of reservoir quality was made. This extensive report included reservoir continuities, fluid contacts, gas column heights, water chemistry, potentiometric surface mapping, and isotherm mapping.

Using a number of key variables specific to our Nahanni formation it was possible to complete a reservoir analysis for water production from our proposed production well. Production rates at various drawdown pressures are used to construct an IPR curve (inflow performance relationship), which reflects the ability of the reservoir to deliver fluid to the wellbore. This is crucial data that helps to determine the long term ability of the well to continue to deliver water to the power facility and to determine the required pump technology for the well.

Figure 16 – Diagram of an IPR curve.

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As our production well has yet to be drilled and tested for drawdown, it was necessary to use a number of variables to create a synthetic test point. Fakete Engineering was able to create a synthetic test point using a reservoir model in F.A.S.T. WellTest and used that value to create the IPR curve in F.A.S.T. VirtuWell. The IPR curve is a snapshot in time, and the duration of synthetic test point is how long we will flow the well prior to obtaining our test point. For oil and gas operations this is normally calculated for less than a year, but due to the long term nature of the geothermal project this was set at 5 years. For the vast reservoir of the Nahanni, it was not practical to use the duration to boundary dominated flow, but an estimate of reservoir size was inputted. The input parameters (based on geological data referenced in this paper) that were used for the well test are as follows:

 Temperature = 140C (based on initial geothermal gradient analysis and isotherm mapping)  Pi (Initial formation pressure) = 6314.9 kPaa (based on Ward report formation pressure analysis)  h (height or open hole of exposed aquifer/Nahanni) = 150 m  k (permeability) = 50 mD  Skin = 0 - unstimulated / undamaged (no limestone acid stimulation necessary)  Phi (porosity) = 8%  Water production: 16,300 bbls/day or 30l/sec (necessary flow rate for turbine technology)  Reservoir size = Large (50 km by 50 km) -Boundaries were not reached during the synthetic test.

The IPR curve based on a 5-year analysis (seen in Appendix B Figure 2) shows that the initial formation pressure starts at 6,300 kPaa, and has an initial drop within the first 6 months to 6,000 kPaa. An initial pressure drop with production is also recognized in multiple well DST testing analyzed in the Ward report. However, within the oil and gas industry, long term water production is not the end goal and wells that result in a reduction of pressure and gas production and experience subsequent water coning are abandoned quickly. For our geothermal project long term water production and well deliverability is crucial and the 5 year analysis shows that the formation pressure only drops to 6,000 kPaa. This pressure is still capable of moving a full 4,200 m of water column to surface without the use of pump technology. Even after 5 years the pressure in the formation is capable to moving water to surface in our production well.

Bottom Hole Temperature & Geothermal Temperature Gradient

Bottom hole temperature is one of the key values that oilfield operations provide to help in determining the geothermal gradient. The geothermal gradient is the rate at which the Earth's temperature increases with depth, indicating heat flowing from the Earth's hot interior to its cooler surface. Away from tectonic plate boundaries, at places like California and Iceland, the global average for continents is 25-30°C/km. Using offset wells surrounding the proposed well site that have been drilled deeper than 3 km and their bottom hole temperatures as recorded in oilfield operations, a map of the geothermal gradient values for the Fort Liard area was created (see Figure 5). These values were calculated assuming that the surface temperature was 0⁰C, since the annual daily mean temperature for Fort Liard is close to this value (-1.2 ⁰C according to Environment Canada).

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Figure 17 - Temperature gradients for offset wells deeper than 3 km TVD.

This map shows that the wells have suitable geothermal gradients ranging from 33-49⁰C/km, with a single rogue value of 17⁰C/km. The formation tops of the Nahanni and Manetoe (the formations of interest), lie at a depth of ~4.17 km, which translates to temperatures from 138⁰C up to 204⁰C at this depth.

Geothermal Gradient Corrections

Due to well-logging and well servicing, the presence of these exploration oil and gas wells provides large quantities of data which allows for a thorough understanding of the subsurface heat environment. However, accurate temperature values in sedimentary basins are subject to correction and thus the quality of the dataset regarding temperature can be compromised for geothermal applications.

Temperatures on the headings of geophysical logs or in drill-stem test reports often include temperature recorded by maximum-reading glass thermometers. These tools are intended to reach their maximum temperature while near the bottom of the well before the upward logging run and are not intended as a measurement of equilibrium formation temperature. For this reason they are often referred to as “bottom-hole temperatures”, abbreviated to BHT. The large thermal mass and long thermal time constant of the valve assembly make single maximum readings potentially unreliable. Bottom-hole temperatures are also taken at the time of maximum disturbance of the well due to the

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presence of drilling fluids (i.e. drilling mud) that can cool the reservoir. In many cases, BHT datasets are subject to significant and unpredictable instrumental and human error and in many instances are not recorded at all (Jessop, 1990).

Despite individual inaccuracies, large numbers of bottom-hole temperatures may, by statistical treatment, give a general picture of temperature distribution and the major regional anomalies.

Research by Majorowicz & Jessop (1981), suggests that BHT numbers in the western Canadian Sedimentary Basin underestimate true reservoir temperature by 15-20%, when compared to formation temperatures that have re-equilibrated after drilling operations. This is in very good correlation with research by Harrison et al. (1983) which used a correction that was developed from North American datasets that relates the difference between the formation temperature and BHT to the depth (Z) at which it is measured:

-6 2 (1) Tcor= -16.51 + (0.018*Z) – ((2.35*10 )*Z )

The Tcor values are added to the original BHT values. Z is the depth in meters. The equation is similar to ones originally proposed by Kehle et al. (1970) and was applied to produce geothermal maps for North America (Blackwell and Richards, 2004a,b; Blackwell et al., 2006; Tester et al, 2006). For a 4170 m well (to the top of the zone of interest) this calculates to adding ~17.70C to recorded bottom hole temperatures and, therefore, our earlier calculation of 141⁰C-204⁰C is actually undervalued by 8-12%.

Figure 18 - Temperature (C) versus depth (km) for corrected (red) and uncorrected (blue) temperature values.

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The graph above shows the difference in values between the uncorrected temperature values at depth (the blue diamonds) and the temperatures with calculated correction values added on (the red squares). A table with the data used to create the plot can be found in Appendix B Table 1. Using linear regression, the uncorrected temperatures (solid blue trendline) show that for a well at our assumed depth (4.17 km to the top of the zone of interest) the estimated temperature gradient is ~39⁰C/km yielding a temperature of approximately 162⁰C. However, corrected temperatures (dotted red trendline) show that this same depth would actually yield a temperature gradient of ~43.5⁰C/km thus producing a temperature of approximately 181⁰C. Thus a 4.17 km well would be around 19⁰C hotter than originally estimated and thus undervalued by about 12%.

Modern equipment for temperature analysis includes a recorder that produces a temperature reading at intervals, typically of thirty seconds or one minute. This provides a means of judging the approach of the temperature recorder to the temperature of the formation water, which can give a more accurate assessment of the true reservoir temperature and geothermal gradient. This can be completed post drilling operations.

The geothermal gradient is the rate at which the Earth's temperature increases with depth, indicating heat flowing from the Earth's hot interior to its cooler surface. Away from tectonic plate boundaries, places like California and Iceland, the global average is 25-30°C/km. To calculate a location- specific geothermal gradient, bottom hole temperatures from the 14 deep wells (> 3000m) near Fort Liard were used. Assuming an under estimation of 12% for bottom hole temperature due to cooling by drilling fluids and formation disturbance, and a mean average temperature at surface of 00C, the average corrected temperature gradient was 42.70C/km. At a depth of 4,170m, top of the formation of Manetoe, the temperature would be ~1780C and a bottom hole of 4,320m would be 1840C

Although the calculation of the corrected bottom-hole temperature is relevant to the overall project, the uncorrected geothermal gradient of 39.00C/km (figure 18) was used for calculating the geothermal reserves estimate.

Geothermal Resource and Geothermal Reserves Estimate Introduction to Canadian Geothermal Code for Public Reporting

To understand the risk associated with the subsurface energy programs (like oil and gas or geothermal energy), it is crucial to understand the assessment of recoverable resources. Unlike wind or solar, energy resources within our planet may not be recoverable to surface and drilling is required to fully understand the resources actual potential. To help analysis of the risk and subsurface potential associated with geothermal energy resources, The Canadian Geothermal Energy Association (CanGEA) has developed a reporting code of resource potential similar to those in mining (43-101) and oil and gas reservoir analysis (53-101).

The Canadian Geothermal Code for Public Reporting (the Geothermal Code) was developed for public reporting of geothermal resources and reserves. CanGEA and GEA (Australian Geothermal Energy Association) recently collaborated with the Australian Geothermal Energy Group to jointly produce a methodology for estimation, quantification of geothermal resources and reserves. The resulting document, The Geothermal Reporting Code (2008 Edition) was the world’s first Code for public

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reporting of geothermal data. Key elements of the Australian Code have been adopted and/or formed the basis of the Canadian Code (CanGEA , 2010).

At its most basic interpretation, geothermal energy is the energy in form of heat beneath the surface of the solid Earth. The Geothermal Code is relevant to all end uses of Geothermal Energy including both electricity generation and direct use projects. The methodology is relevant to all forms of geothermal play including naturally convective systems, Hot Sedimentary Aquifers (HAS), Hot Rock and Engineered Geothermal Systems (EGS), volcanic and non-volcanic heat sources.

The Geothermal Code is a required minimum standard for Public Reporting. It outlines the requirements for reporting of exploration results, geothermal resources and geothermal reserves and provides a minimum, mandatory set of requirements for the public reporting of geothermal resources and reserves. Companies are encouraged to provide information in their Public Reports that is as comprehensive as possible.

The Geothermal Code was designed as a basis for transparency, consistency and confidence in public reporting of geothermal information with the following primary objectives:

1. Provide a reporting basis that is satisfactory to investors, shareholders and capital markets, such as the Canadian Securities Exchanges, in a similar manner that existing Canadian Codes provide for reporting of mineral and petroleum resources (National Instruments 43-101 and 51-101, respectively).

2. Be applicable to geothermal plays in both Canada and internationally since the Canadian Securities Markets are utilized for the exploration and development of both local and international geothermal plays for companies based in Canada and other jurisdictions.

This report references the Geothermal Code to Public Reporting as it pertains to project specific exploration results, geothermal resources or reserves, and was prepared for the purpose of informing investors or potential investors and their advisors. This report is designed to satisfy regulatory requirements of the geothermal code.

Geothermal Code – Resource & Reserves

Based on other international geothermal codes, mining codes and oil and gas reserves reporting; the geothermal code uses three key categories to differentiate understanding of a geothermal energy potential; Inferred, Indicated and Measured.

“Inferred Geothermal Resource’ is that part of a Geothermal Resource for which recoverable thermal energy (MWth-years) can be estimated only with a low level of confidence.

The Inferred category is intended to cover situations where a Geothermal Play has been identified and limited measurements and sampling completed, but where the data are insufficient to allow the extent of the Geothermal Resource to be confidently interpreted. It is based mainly on indirect measurements, for example extrapolation of temperature profiles (to a reasonable degree and on a rational basis) and other associated measurements such as rock properties and heat flow, and requires a reasonably sound understanding of the subsurface geology in three dimensions derived, for example, from geophysical surveys, to indicate temperature and dimensions.

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‘Indicated Geothermal Resource’ is that part of a Geothermal Resource that has been demonstrated to exist through direct measurements that indicate temperature and dimensions so that recoverable thermal energy (MWth-years) can be estimated with a reasonable level of confidence. Thermal energy in place has been estimated through direct measurements and assessments of volumes of hot rock and fluid with sufficient indicators to characterize the temperature and chemistry.

A Geothermal Play can be classified as an Indicated Geothermal Resource when there has been sufficient delineation drilling, testing and other survey information into the Play such that the nature, quality, amount and distribution of data allow confident interpretation of the geological framework, the assumption of continuity of the thermal energy distribution and a reasonable estimate of the extent of the Play. For an Indicated Geothermal Resource the well locations would be too widely or inappropriately spaced to confirm reservoir continuity but would be spaced closely enough for continuity to be indicated.

A ‘Measured Geothermal Resource’ is the part of a Geothermal Resource that has been demonstrated to exist through direct measurements that indicate at least reservoir temperature, reservoir volume and well deliverability, so that recoverable thermal energy (MWth-years) can be estimated with a high level of confidence.

A Geothermal Play may be classified as a Measured Geothermal Resource when the nature, quality, amount and distribution of data are such as to provide reasonable certainty in the opinion of the Qualified Person determining the Geothermal Resource, that the thermal energy in place can be estimated to within close limits and that any variation from the estimate would be unlikely to significantly adversely affect potential economic viability. This category requires a high level of confidence in, and understanding of the dynamics of the heat source.

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Figure 19 - Canadian Geothermal Code - Resources and Reserves (CanGEA 2010).

A ‘Geothermal Reserve’ is that portion of an Indicated or Measured Geothermal Resource which is deemed to be economically recoverable after the consideration of both the Geothermal Resources parameters and Modifying Factors. These assessments demonstrate at the time of reporting that energy extraction could reasonably be economically and technically justified.

The term ‘economically recoverable’ implies that heat extraction of the Geothermal Reserve has been demonstrated to be viable under reasonable financial assumptions. What constitutes the term ‘reasonably economically and technically justified’ will vary with the type of Geothermal Play, the level of study that has been carried out and the financial criteria of the individual company.

A ‘Probable Geothermal Reserve’ is the economically recoverable part of an Indicated or measured Geothermal Resource. It will differ from Proved Reserves because of greater uncertainty, usually in terms of factors that impact the recoverability of thermal energy such as well deliverability or longevity of the project. There will be sufficient geoscience and engineering indicators to characterize flow, temperature and chemistry but may be less direct measures indicating the extent of the Geothermal Resource, within economically feasible drilling depth. Appropriate technical evaluation, assessments and studies will have been carried out, and include consideration of and modification by appropriate assumption related to drilling, economic, legal, environmental, social, and governmental factors. Such technical work that demonstrates at the time of reporting that commercial energy extraction is reasonably justified.

A Probable Geothermal Reserve has a lower level of confidence than a Proved Geothermal Reserve but is of sufficient quality to serve as the basis for a decision on the development of the Geothermal

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Resource. It is ‘more likely than not’ that the Reserve estimate is correct, reflecting a greater than 50% chance of occurrence.

A ‘Proved Geothermal Reserve’ is the economically recoverable part of a Measured Geothermal Resource. It includes a drilled and tested volume of rock within which well deliverability has been demonstrated and commercial production for the assumed lifetime of the project can be forecast with a high degree of confidence. Appropriate assessments and studies have been carried out, and include consideration of and modification by the assumed economic, market, legal, environmental, social and governmental factors. While these assessments demonstrate at the time of reporting that heat extraction could reasonably be economically justified, it is not until production is achieved which satisfies all the technical and modifying factors that is ‘Proved’.

A Proved Geothermal Reserve represents the highest confidence category of Geothermal Reserve estimate. The type of Geothermal Play or factors could mean that Proved Geothermal Reserves are not achievable in some parts of a Measured Geothermal Resource.

Temperature –Depth Estimations

In order to accurately characterize the heat resource opportunity, it is necessary to understand the depth to a potential resource or cut-temperature for development. There is an established statistical relationship between heat flow (Qo), heat generation (A) and thermal conductivity (K) that can be used to calculate the temperature at depth. However, for this report the geothermal play has been confined to the depth of the zone of interest, and the area surrounding Fort Liard has the advantage that multiple wells have been drilled in the surrounding area and have been used to verify temperature values at the depth of resource potential.

As discussed earlier in this report, the actual recorded bottom hole temperatures were used to calculate the temperature gradient of 390C/km. Using this value for the proposed well site, and an average annual ambient surface temperature of 00C, we can calculate estimated temperatures at the top of the formations of interest and the projected bottom hole depth. Using the temperature gradient and the depths calculated in the Estimated Formation Top Depths and Elevations section, the top of the Nahanni formation at a depth of ~4.17 km TVD would be 1630C. The Manetoe formation exists within the Nahanni and would be expected to be a similar temperature. The bottom hole depth is estimated to be 150 m deeper than the top of the Nahanni formation at ~4.32 km TVD which would be ~1680C. For the calculation of thermal energy potential, 1650C was used for the average value of the formation temperature.

Calculation of Thermal Energy Potential

To estimate the thermal energy or heat content of a rock mass, it is necessary to calculate the resource volume. The reservoir area is estimated to be 25 km2 and the reservoir thickness 150 m. Total volume for the potential resource is therefore 3.75*109m3 or 3.75 km3.

0 Based on resource temperatures the initial temperature of T1(◦C) is a conservative value of 165 C. 0 If this rock mass of volume V and density ρ is cooled through a temperature difference of C [T1 – Tf (◦C)] 0 to a reinjection temperature of 70 C (Tf), then the heat removed is given by:

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Q = Cp * ρ * V * (T1 – Tf) where reasonable average values are 2,450 kg/m3 and 800 J/(kg 0C), for the density (ρ) and heat capacity (Cp) of the rock, respectively. This is consistent with parameters used by the MIT report on EGS potential in the USA (Tester, 2006, Blackwell, 2006).

The quantity of thermal energy released from the 3.75 km3 rock volume with initial temperature 1800C was then calculated. If the heat capacity impact of porosity is ignored this rock mass is cooled through a temperature difference of 1100C to a final temperature of 700C, then the heat removed Q (in Joules (J)) is given by

Q = (2450 kg m−3) * (800 J kg−10C)* 3.75 km3) * (1650C -700C) = 6.34 x 1017 J

Using this approach, the quantity of thermal energy that could potentially be released from a volume of deep-seated rock (termed here in-place resource) can be calculated to see patterns of potential extraction. The total energy content was also calculated based on these parameters. The size of the accessible resource is much smaller than implied by this simplistic approach and it can be as low as 2% of the total in-place resource (conservative), 20% (midrange) and 40% (upper limit) (Tester, 2006). For areas of potentially very low permeability and EGS applications like the rock formation, the value is as low as 2% of the heat resource for heat available for production, (Tester,2006). However, in sedimentary aquifer zones with higher porosity and permeability, values as high as 25% have been used (White & Williams, 1975). For the Fort Liard proposed well site an expected recovery factor of 15% was used.

Fort Liard Geothermal Potential

As discussed in Oilfield Well Database section, the area of Fort Liard has the advantage of having an extensive history of oil and gas exploration and development drilling in the area. The formations of interest, the Nahanni and Manetoe, have been accessed on a few occasions in the surrounding area with sufficient delineation drilling, formation mapping and reservoir testing to better characterize the resource. The nature, quality, amount and distribution of data allow confident interpretation of the geological framework and there is an assumption of continuity of the thermal energy distribution and a reasonable estimate of the extent of the Play at the proposed well site. The project therefore does have the necessary depth of drilling required for “direct measurements that indicate temperature and dimensions” as per the geothermal code.

There have not, however, been exact temperature measurements at the proposed well site and the flow regime from a geothermal well has not been verified. Therefore, the geothermal resource in the Fort Liard area can only be classified as an ‘Indicated’ Geothermal Resource Play.

With conventional binary turbine technology and standard geothermal drilling into the necessary heat resource (to depths past ~4,170 m into the Nahanni and Manetoe formations in this area), the “indicated heat resource” in the area of Fort Liard is on the order of 6.34 x 1017 Joules of thermal energy in place as classified according to the Canadian Geothermal Reporting Code, relative to 700C. The recoverable and converted energy is equivalent to approximately 880 kWe for 310 years, by assuming 15% thermal energy recovery, plant inlet of 1600C, plant outlet of 700C, and 9% efficiency factor.

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To estimate the potential magnitude of thermal and electrical energy that could be produced with the use of water as a high heat capacity carrier, Borealis calculated the thermal power and related electrical power using a binary power system conversion at temperatures of 1600C at 9% (Tester, 2006)

With the commencement of a drilling program, the project will likely provide a greater understanding of the heat reservoir volume and well deliverability when confirmed with flow testing of production wells. This data will help move the geothermal resource play into the category of “Measured Resource” and potentially “Probable Reserves”.

Assumptions, Caveats

The volumetric method used in the resource assessment of Fort Liard is based on estimating the energy in place under a given land based on volume and temperature and how much heat can technically extracted for energy utilization. The key parameters and assumptions used in the volumetric assessment are as follows:

 Project Life: While 30-40 years is suitable for the life of a power plant, it should be noted that this reservoir has been calculated to be capable of delivering power for ~310 years; this assumes the full recoverable energy is extracted within 310 years. Adopting a shorter project life would mean that a larger MWe output would be recoverable.  Project Area: Geothermal field area is 25 km2, based on a very conservative 5km x 5km footprint surrounding the proposed well site.  Resource Temperature: The resource temperature was assumed to be 165°C and the plant inlet temperature 1600C. These are estimated average temperatures for the entire reservoir volume based on geothermal gradient data using uncorrected bottom hole temperatures.  Cut-off Temperature: The cut-off grade for the resource volume may be temperature dependent and a cut off temperature of ~70°C was assumed; however, this is less than estimated temperatures of the formations of interest, the Nahanni and Manetoe formations.  Base Temperature: It is necessary to define the base temperature relative to which the stored energy will be estimated. This will be related to temperature of the power conversion process and general consideration of how much cooling is practical on the condensing side of the plants. The average ambient temperature of the community of Fort Liard is -1.20C, and a 00C ambient air value was used in calculation. So a value of <200C for cooling is a reasonable temperature for binary turbine technology with evaporative cooling towers or water cooling. With this type of plant, it is appropriate to assume a fluid rejection temperature of 70°C, which is assumed to be the same as the reinjection temperature at the reservoir. A base temperature of 70°C has therefore been adopted.  Reservoir Volume: The resource volume is defined as the volume or rock at >90°C and within the Nahanni and Manetoe formation, the resource volume is calculated by multiplying the resource/project area by its thickness of the heat reservoir capable of efficient power generation. The thickness of the geothermal system is 150 m, based on the depth of drilling into the Nahanni formation. Multiplying the area (25km2 ) and reservoir thickness (150 m) gives a reservoir volume of 3.75 km3.

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 Heat Capacity: The heat capacity of the reservoir rocks is estimated by multiplying the specific heat capacity by the specific gravity (density). The specific heat capacity was taken to be 800 J/(kg °C), which is considered a typical value for the Nahanni and Manetoe limestone/dolostone layers.  Density: The average particle density of reservoir rocks was taken to be 2,450 kg/m3, which is typical for the range of lithologies encountered in previous drilling.  Porosity: The average porosity was assumed to be 5% based on log data of the Nahanni and Manetoe limestone/dolostone formations.  Flow Rate: 25 kg/sec, based on average flow rate data necessary for turbine technology to supply the necessary power demands of the community of Ft. Liard  Liquid saturation: It is assumed that this geothermal resource will be a liquid phase resource with little to no % of steam.  Conversion Efficiency (thermal to electric): The conversion efficiency depends on the reservoir temperature, climatic conditions and the specific design of the power plant and facilities. The development plan has considered a binary turbine, in which case the conversion efficiency calculation from Tester, 2006 is 9% at temperatures greater than 1500C. This is net of parasitic power losses within the plant, since the planned project design likely requires pumping for water production and reinjection wells.  Recovery Factor: Based on other Hot Sedimentary aquifers, the porous nature of the zones of interest, the recovery factor is 15%.  Capacity factor: This was assigned a value of 0.9, based on a comparison with similar types of geothermal power plants operating in similar remote locations  The geothermal system is closed system with no energy exchange with surrounding rock from outside the permit area.

Conclusions

This paper has provided extensive information regarding subsurface geology of the Fort Liard region, especially that of the formations of interest: the Nahanni and Manetoe formations. The subsurface analysis demonstrates that the zone of interest as well as all other existing formations within the area are well understood and documented. The elevation and the depth to the formation tops of all formations that are likely to be drilled through were estimated using numerous data sets including offset well formation top data, generated cross sections and calculated depth via seismic velocity. Temperature gradients and bottom hole temperatures were also estimated using surrounding offset well data and a formula correcting for undervalued bottom hole temperatures.

The zone of interest has been shown to be vuggy, porous, permeable, fractured, wet and highly pressurized. All of these factors contribute to a viable geothermal resource. The highly pressurized environment (calculated to be around 6,300 psig, or 43,000 kPa), flow rate (25 kg/s) and temperature (1650C uncorrected, 1800C corrected) easily fulfill the necessary requirements for the power production from multiple binary turbine facilities.

With conventional binary turbine technology and standard geothermal drilling into the necessary heat resource (to depths of ~4,170 m, into the Nahanni and Manetoe formations in this area), the

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“indicated heat resource” in the area of Fort Liard is on the order of 6.34 x 1017 Joules of thermal energy in place as classified according to the Canadian Geothermal Reporting Code, relative to 70⁰C. At a total of 25kg/sec flow rate and 1600C plant inlet temperature and assuming 15% thermal energy recovery and 9% electrical efficiency factor, the reservoir could produce recoverable and converted energy equivalent to 880 kWe and 9,800 kWth. At this rate of heat production for the reservoir volume of 7.5 km3 the geothermal reservoir would be sustainable for 310 years.

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References

Blackwell, D. D. and M. Richards, 2004a. Geothermal Map of North America. American Association of Petroleum Geologists, Tulsa, Oklahoma, 1 sheet, scale 1:6,500,000.

Blackwell, D. D. and M. Richards, 2004b. Calibration of the AAPG Geothermal Survey of North America BHT Data Base, AAPG Annual Meeting, Dallas, Tx, paper 87616, 2004.

Blackwell, D.D., P.T., Negraru, and M. Richards, 2006. Assessment of the Enhanced Geothermal System Resource Base of the United States, Natural Resources Research, 15, DOI: 10.1007/s11053-007-9028-7.

Blusson, S.L., Gabrielse, H., Roddick, J.A., 1973. Geology of Flat River, Glacier Lake, and Wrigley Lake Map-Areas, District of Mackenzie and Yukon Territory: Canadian Geological Survey Memoir No. 366, 168 PP, 8PL. Bulletin Issue 197352, Accession No. 183106.

Chipperfield, J.L., Hanko, J., Trieber, B., 2009. Exploration Review of ADK Traditional Lands, Northwest Territories, for Jayhawk Frontier Exploration Limited.

Davidson, D.A. and Snowdon, D.M., 1978. Beaver River Middle Devonian Carbonate: Performance Review of a High-Relief, Fractured Gas Reservoir With Water Influx. Society of Petroleum Engineers of AIME, Journal of Petroleum Geology, p. 1672-1678.

Environment Canada, 2011, Canadian Climate Normals 1971-2000: Fort Liard A, Northwest Territories http://climate.weatheroffice.gc.ca/climate_normals/results_e.html?stnID=1646&lang=e&dCode=0&pro vince=NWT&provBut=Search&month1=0&month2=12

Fallas, K.M. and Lane, L.S., 2001. Geology of the Mount Martin, Fisherman Lake and Mount Flett map areas, Yukon Territory and Northwest Territories. Geological Survey of Canada, Current Research 2001- A5, 11p.

Glass, D.J., 1997. Lexicon of Canadian Stratigraphy Volume 4 Western Canada, Including Western British Columbia, Alberta, Saskatchewan and Southern Manitoba. Canadian Society of Petroleum Geologists. ISBN 0-920230-23-7

Goodfellow, R.B., Barr, E.E., 2001. A Case Study of the Design and Operation of High CO 2 Production with H2S. Corrosion 2001, Paper no. 01047.

Grasby, S., Majorowicz, J. & Ko, M. (2009). Geothermal Maps of Canada; Geological Survey of Canada

Open file 6167.

Harrison, W.E., Luza, K.V., Prater, M.L., and Chueng, P.K., 1983. Geothermal resource assessment of Oklahoma, Special Publication 83-1, Oklahoma Geological Survey. Government of Saskatchewan, 2011, http://www.er.gov.sk.ca/Fact-Sheets

Jessop, A.M., 1990. Thermal Geophysics, Elsevier, Amsterdam. Physics of the Earth and Planetary Interiors, Volume 69, Issue 1-2, p. 144-144.

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Jessop, A. M., Allen, V. S., Bentkowski, W., Burgess, M., Drury, M., Judge, A. S., et al. (2005). The Canadian Geothermal Data Compilation. Open File 4887, Geological Survey of Canada.

Jessop, A. M., Ghomshei, M. M., & Drury, M. J. (1991). Geothermal Energy in Canada. Geothermics , 20 (5-6), 369-385.

Kehle, R.O., Schoppel, R.J., and DeFord, R.K., 1970. The AAPG geothermal survey of North America, U.N. Symposium on the Development and Utilization of Geothermal Resources, Pisa 1970, Geothermics Special Issue 2(1), p. 358-368.

Majorowicz, J., Grasby, S., (2010), Heat Flow depth temperature variations and stored thermal energy for enhanced geothermal systems in Canada, Geophys, Eng 7.

Majorowicz, J.A. Jessop, A.M., Regional heat flow patterns in the Western Canadian Sedimentary Basin, Tectonophysics, Volume 74, Issues 3-4, 20 April 1981, Pages 209-238, ISSN 0040-1951, DOI: 10.1016/0040-1951(81)90191-8.

Morrow, D.W., 2005. The Kotaneelee Gas Field, Yukon Territory: An “HTD”-Type Liard Basin Dolomite Play: 2005 Core Conference, Global Roundup- Exploring Energy Systems, p. 284-297.

Morrow, D.W., Aulstead, K., 2004. Convection-driven Subsurface Hydrothermal Dolomitization in Middle Devonian-age Shallow Water Limestones in the 0.4 TCF Kotaneelee Gas Field of southeastern Yukon Territory. 2004 Dolomite Conference, Canadian Society of Petroleum Geologists.

Morrow, D.W., Aulstead, K.L., Cumming, G.L., 1990. The Gas-Bearing Devonian Manetoe Fascies, Yukon and Northwest Territories.

Morrow, D.W., Davies, G.R., 2001. The Liard Basin Manetoe Dolomite: A New Look at a Frontier Deep Gas Play, p. 028-1 – 028-5. Rock the Foundation Convention 2001, Canadian Society of Petroleum Geologists.

Pigage, L.C., 2006. Stratigraphy summary for southeast Yukon (95D/8 and 95C/5). In: Yukon Exploration and Geology 2005, D.S. Emond, G.D. Bradshaw, L.L. Lewis and L.H. Weston (eds.), Yukon Geological Survey, p. 267-285.

Tester, J. W., Anderson, B. J., Batchelor, A. S., Blackwell, D. D., DiPippo, R., Drake, E. M., et al., 2006. The Future of Geothermal Energy: Impact of Enhanced Geothermal Systems (EGS) on the United States in the 21st Century. Massachusetts Institute of Technology, Cambridge

Walsh, W.M. Geology- Liard Basin; Well penetrations and Drill Stem Test results of Middle Devonian carbonates. Geology compiled from Geological Survey of Canada. NTS 94N, 94O, 95B, 95C

Ward, G., 1997. Hydrodynamic Evaluation of the Devonian to Precambrian Formations, Liard Arch (59°30’ – 63°00’ N, 121°00’ – 125°00’ W): Pressure versus Elevation Graph. Ward Hydrodynamics Ltd.

Warren Walsh, Osman Salad Hersi, Mark Hayes, 2005. Liard Basin – Middle Devonian Exploration in Summary of Activities 2005, BC Ministry of Energy and Mines, pages 38-41.

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http://www.em.gov.bc.ca/Mining/Geoscience/PublicationsCatalogue/OilGas/OGReports/Documents/20 05/2005_Walsh_et_al.pdf

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Appendix A: Geological Formation Analysis for Relevant Units

Potential Zones Overlying the Zone of Interest These zones are observed to lie above the zone of interest: the Nahanni and Manetoe formations.

Tertiary Environment Gravel, sand and glacial till deposits of the Laurentide (the last; Wisconsin age) continental glaciation overlie most of the area. These deposits are at least 50 m thick and range up to several hundred meters thick.

Relevance Information regarding the thickness of the unconsolidated tertiary sediments in the Fort Liard area is poorly constrained, therefore it is crudely estimated that drilling will encounter ~150 m of this unit.

Sikanni Formation- Fort St. John Group (Lower Cretaceous) Offset Well Occurrence This formation was only encountered within a single offset well: CDN Forest et al. Fort Liard K-32, 300K326010123150. The coordinates of this well are 60.02735N, 123.36533W and the distance from the proposed well site is 24.31 km, S/SE.

Geology This formation is composed of sandstone, siltstone and shale. The sandstone is greenish grey, thickly bedded, fine-grained, commonly calcareous or glauconitic and much of it is finely laminated and cross-bedded. The siltstone is dark grey to brownish grey, argillaceous, massive to thick bedded and contains fine laminations and crossbeds.

The formation is approximately 270 m thick as measured in a single well of the Fort Liard area. The lower beds of the formation grade into the underlying Lepine shale. The upper boundary is distinct between the sandstone and overlying Sully shale.

Relevance Due to minimal presence and the large distance of occurrence from the proposed well, it is expected that this formation is of limited relevance and not expected to be encountered.

Lepine Formation (Lower Cretaceous) Offset Well Occurrence This formation occurs in 3 wells of the Fort Liard area.

Geology This formation is composed of mudstone, shale and silty shale. The mudstone is silty, dark, and is the lower unit (~100m) of concretionary mudstone that is abundantly fossiliferous. The shale is the succeeding unit after the mudstone (~125m) and is black and flaky to fissile. The upper unit is comprised of silty shale which contains sideritic concretions and experiences an increased abundance of thin beds of silty sandstone.

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As directly measured in the wells of the Fort Liard, the range of thickness of the formation is from 150-400 m with an average thickness of 235 m. This formation conformably and transitionally overlies the Scatter Formation and is gradationally overlain by the Sikanni Formation.

Relevance Due to the proximity of the occurrence of the formation to the location of the proposed well and the amount of wells that the formation occurs in it is expected to encounter this unit in drilling.

Scatter Formation (Lower Cretaceous) Offset Well Occurrence This formation occurs in 39 wells of the Fort Liard area.

Geology This formation is a 365 m wedge comprising two major units of fine-grained, glauconitic sandstones separated by a thick shale member. It has 3 identifiable members: the basal (Bulwel) member which is a thick and resistant succession of flaggy to thick bedded, glauconitic sandstone; the middle (Wildhorn) member, which is a silty, concretionary, marine mudstone; the upper (Tussock) member which has alternating units of silty, glauconitic sandstone and silty mudstone.

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 100-150 m, with an average thickness of 137 m.

Relevance Due to the proximity of the occurrence of the formation to the location of the proposed well and the amount of wells that the formation occurs in it is expected to encounter this unit in drilling.

Garbutt Formation (Lower Cretaceous) Offset Well Occurrence This formation occurs in 40 wells of the Fort Liard area.

Geology This formation is composed of dark grey shale and siltstone with sideritic concretions. There are two main divisions: a lower and an upper unit. The lower unit is composed of silty mudstone, argillaceous siltstone, sideritic concretions and a few thin seams of bentonite and has a glauconitic basal mudstone. The upper unit is mainly rubbly mudstone with rows of reddish brown weathering and has sideritic concretions. The upper beds include argillaceous siltstone and thin beds of laminated sandstone.

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 50-261 m, and has an average thickness of 140 m. This formation may be considered to include the Chinkeh Formation. It unconformably overlies Triassic Toad Formation and has a traditional upper contact with the overlying Scatter Formation.

Relevance Due to the proximity of the occurrence of the formation to the location of the proposed well and the amount of wells that the formation occurs in it is expected to encounter this unit in drilling.

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Spirit River Formation- Fort St. John Group (Lower Cretaceous) Offset Well Occurrence This formation was only encountered within a single offset well: EOG MAXHAMISH C- 083-L/094-O- 15, 200c083L094O1500. The coordinates of this well are 59.98784N, 122.90921W and the distance from the proposed well site is 40.51km SE.

Geology This formation is composed of three members: the Notikewin, Falher and Wilrich. The Notikewin is a grey yellowish and greenish grey more or less clayey sandstone. It is fine- to medium-grained, containing interbeds of light to dark grey shale with ironstone. The Falher is a variable succession of lithic greywacke, shales and siltstones with some thin coal beds; traces of glauconite are fairly common. The Wilrich is composed of dark grey shales with some thin interbeds of sand and silt.

The formation is approximately 230 m thick as measured in a single well of the Fort Liard area. It has a very abrupt conformable contact with the overlying Harmon shale member of the Peace River Formation and is conformable with the underlying Bluesky Formation, which might be considered a basal sandy introduction to the Spirit River Formation.

Relevance Due to minimal presence and the large distance of occurrence from the proposed well, it is expected that this formation is of limited relevance and not expected to be encountered.

Relevance Due to the proximity of the occurrence of the formation to the location of the proposed well and the amount of wells that the formation occurs in it is expected to encounter this unit in drilling.

Chinkeh Formation (Cretaceous) Offset Well Occurrence This formation occurs in 47 wells of the Fort Liard area.

Geology This formation has four major lithotypes:  conglomeratic breccia,  interbedded coal, carbonaceous shale, rooted sandstone, conglomerate,  conglomeratic lag related to marine transgression, and  upward coarsening sandstone

The lower part of the formation consists locally of an angular-chert breccia overlain by medium- to coarse-grained sandstone and conglomerate with coal and rooted beds. The uppermost part of the formation consists of a basal conglomeratic layer overlain by an upward-coarsening, fine- to medium- grained, well-sorted marine sandstone with bioturbated shale.

The Cretaceous strata in the Liard basin have good petroleum source-rock and reservoir potential, and as such hydrocarbons may be present in sandstone of the Chinkeh Formation, which has porosity values of 8-18%.

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As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 6-112 m, with an average thickness of 35 m. The formation unconformably overlies older Palaeozoic strata.

Potential play types include stratigraphic traps formed by incised-valley deposits and shallow- marine sandstone pinching out laterally into marine shales of the Garbutt Formation. A potential structural play may occur along the Bovie fault zone where reservoirs may abut against a shale seal on the eastern side of the fault.

Relevance Due to the proximity of the occurrence of the formation to the location of the proposed well and the amount of wells that the formation occurs in it is expected to encounter this unit in drilling.

Toad Formation (Lower to Middle Triassic) Offset Well Occurrence This formation occurs in 30 wells of the Fort Liard area.

Geology This formation consists of very calcareous siltstone, silty limestone and silty shale. There are also minor amounts of silty dolostone and calcareous sandstone. Thin phosphate nodules occur near the base of the formation. The formation experiences dark grey shaly to flaggy weathering.

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 62-375 m, with an average thickness of 112 m. The unit is gradationally overlain by medium to pale grey to brownish grey weathering fine to medium grained sandstone, siltstone and (locally) crystalline limestone of Liard Formation.

In the western foothills north of Peace River the formation is overlain abruptly and possibly unconformably by medium grey weathering sandstone, siltstone and limestone of Ludington Formation. In the eastern foothills of the Liard River Alaska Highway area the formation is disconformably overlain by the Fort St. John Group. It is gradationally overlain by more recessive weathering, less calcareous, more dolomitic siltstone, shale and sandstone of the Grayling Formation.

Relevance Due to the proximity of the occurrence of the formation to the location of the proposed well and the amount of wells that the formation occurs in it is expected to encounter this unit in drilling.

Fantasque Formation (Permian) Offset Well Occurrence This formation occurs in 41 wells of the Fort Liard area.

Geology This formation is rhythmically bedded and composed of spicular chert, shale and siltstone. A thin basal lag deposit of phosphate and chert nodules and pebbles exists in north-eastern British Columbia.

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 2-194 m, with an average thickness of 118 m. This unit is a part of the Ishbel Group.

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Relevance Due to the proximity of the occurrence of the formation to the location of the proposed well and the amount of wells that the formation occurs in it is expected to encounter this unit in drilling.

Golata Formation (Mississippian) Offset Well Occurrence This formation occurs in 15 wells of the Fort Liard area.

Geology This formation is composed of argillaceous limestone, dark shale and sandstone, with a base of fossiliferous limestone and limey shale. It grades into dark grey to black waxy shales with occasional siltstones. It is generally regarded as a tidal flat deposit with local lagoonal developments (coal).

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 51-247 m, with an average thickness of 84 m. This unit is a part of the Ishbel Group and correlates northward to the lower part of the Mattson Formation. In the eastern foothills of north-eastern British Columbia the contact with the underlying Debolt Formation is generally conformable. It overlies the Prophet formation in eastern foothills of north-eastern British Columbia and is conformably overlain by Kiskatinaw sandstones.

Relevance Due to the proximity of the occurrence of the formation to the location of the proposed well and the amount of wells that the formation occurs in it is expected to encounter this unit in drilling.

Flett Formation (Mississippian) Offset Well Occurrence This formation occurs in 65 wells of the Fort Liard area.

Geology This formation is composed of carbonates and calcareous shale that is thin bedded, dark and argillaceous. It contains intercalations of sandstone in the northern Liard range.

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 195-950 m, with an average thickness of 640 m. It overlies the Prophet Formation and conformably overlies the Clausen Formation.

Relevance Due to the proximity of the occurrence of the formation to the location of the proposed well and the amount of wells that the formation occurs in it is expected to encounter this unit in drilling.

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Pekisko Formation- Rundle Group (Mississippian) Offset Well Occurrence This formation occurs in 9 wells of the Fort Liard area.

Geology This formation is composed of limestone, of which there are two intervals: a lower interval with a predominance of coarsely crinoidal, massive limestone and an upper interval that is a very fine crystalline to lithographic limestone with a minor amount of coarsely crinoidal limestone.

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 30-83 m, with an average thickness of 39 m. It conformably overlies the argillaceous Band Formation and conformably underlies the Banner silt member and dark limestones of the Shunda Formation.

Relevance Due to the lack of proximity of the formation to the location of the proposed well and the limited occurrence of the formation it is possible but not expected to encounter this unit in drilling.

Banff Formation (Uppermost Devonian) Offset Well Occurrence This formation occurs in 17 wells of the Fort Liard area.

Geology This formation grades in green shales and shaly limestone, and thence to cream buff, or pink, cryptograined, cherty limestone, with echinoid and Bryozoa debris, interbedded with thin silty argillaceous layers. The lower succession is of shale and marlstone grading upward and eastward into spiculite, bedded chert and carbonates that pass into interbedded sandstone, siltstone and shale. The formation is composed of numerous members, as is laid out in the Lexicon of Canadian Stratigraphy, with those members that are deemed important summarized below:  Member A is a ~490 m thick black to dark grey shale with subordinate turbiditic sandstone and silty to cherty carbonates.  Member B gradationally overlies Member A and is 50-250 m thick. It is composed of laminated to rhythmically bedded, cherty to argillaceous dark grey spiculite, siltstone, dolostone, lime mudstone and wackestone. It grades upward and eastward into medium bedded, cherty, dark grey bryozoanpelmatozoan lime packstone and wackestone.  Member E is present in the eastern Cordillera of south-western Alberta and the western part of the southern plains. It conformably overlies Member B and passes north-eastward into the basal Pekisko Formation. It is medium to thick bedded, generally greater than 30m thick, contains rhythmically bedded turbidite-like beds and consists of dark grew cherty, spiculitic, skeletal lime packstone and wackestone  Member F is correlative with the middle to upper Pekisko Formation and the basal Shunda Formation. It overlies Member E and occurs in the same area. It is medium to thick bedded marlstone, rhythmically interbedded with dark grey dolostone and cherty pelmatozoan wackestone to packstone. The formation is generally more than 130m thick in the northeast, thickens south-westward in the eastward front ranges.

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As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 223-651 m, with an average thickness of 518 m. In the Peace River Embayment and farther northward the formation thins slowly below the Rundle formation, from greater than 450m in southwest to ~300m in the northeast. Thinning is accompanied by a decrease in the proportions of chert and shale, as well as a corresponding increase in limestone, siltstone and sandstone.

Northward the Exshaw Formation passes laterally into the Banff Formation, which passes south- westward into the Besa River Formation. The Banff underlies the Shunda Formation in north-eastern British Columbia. Northeast of the subcrop edge of the overlying Rundle Group, Mesozoic strata unconformably overlie the Banff Formation.

Relevance Due to the lack of proximity of the formation to the location of the proposed well and the limited occurrence of the formation it is possible but not expected to encounter this unit in drilling.

Besa River Formation (Middle Devonian to Lower Carboniferous) Offset Well Occurrence This formation occurs in 37 wells of the Fort Liard area.

Geology This dark shale formation has occurrences of spiculite lithofacies that occur in the south-western District of Mackenzie. Spiculite, bedded chert and spicule-rich carbonates constitute the spiculite facies and all of these are commonly intercalated with the dark-shale facies and occur as tongues that thin basin-ward (south-westward). The Besa River Formation is partly coeval with the Banff Formation.

As directly measured in the wells of the Fort Liard area, the range of thickness of the Besa River Upper unit is from 1-1322 m and of the Besa River Lower unit is 355-936 m. The average thickness of the Besa River Upper unit is 823 m while the average thickness of the Besa River Lower unit is 526 m. It is preserved mainly in the eastern Rocky Mountain Thrust Belt and southern Mackenzie Fold Belt. In the northeast it is present on the western Interior Platform and is up to 1655 m thick.

The carbonate Dunedin Formation passes laterally into the Besa River Formation at the British Columbia-Yukon border. From southeast to northwest the lower contact of the Besa River becomes progressively older as the upper contact becomes younger; this reflects a lateral change from carbonate and sandstone dominated formations in the east to shale, mudstone and spiculite in the west. South of 60⁰N it abruptly overlies the Dunedin Formation, and on the eastern portion of this southern section it overlies the Slave Point Formation. The formation generally overlies the Nahanni Formation in the east (above 60⁰N). Southwest of the District of Mackenzie (northernmost British Columbia) the formation passes into the Fort Simpson, Imperial and Exshaw Formations. To the south it passes eastward into the Dunedin, Horn River and Exshaw. It passes eastward in to the Banff, Yohin, Clausen, Golata and Mattson formations and is lithologically and stratigraphically equivalent to the western Fort Simpson Formation.

Relevance Due to the proximity of the occurrence of the formation to the location of the proposed well and the large amount of wells that the formation occurs in it is expected to encounter this unit in drilling.

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Clausen Formation (Lower Mississippian) Offset Well Occurrence This formation occurs in just 4 wells of the Fort Liard area.

Geology This shale formation is thinly laminated and black with few calcareous layers. It contains some beds of more resistant mudstone and may contain interbedded siltstones.

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 31-123 m, with an average thickness of 76 m. It is restricted to the area of the distribution of the overlying Flett formation and underlying Yohin formation. The bottom layer is the more restrictive in size and locality. The unit appears to equate in age with the Banff Formation and is equivalent to the Etanda and Besa River Formations.

Relevance Due to the lack of proximity of the formation to the location of the proposed well and the limited occurrence of the formation it is possible but not expected to encounter this unit in drilling.

Yohin Formation (Mississippian) Offset Well Occurrence This formation was only encountered within a single offset well: CDN FOREST ET AL NORTH LIARD C-31, 300C316040123300. The coordinates of this well are 60.50014N, 123.61154W and the distance from the proposed well site is 30.22 km, S/SE.

Geology This formation is composed of brown, fine-grained sandstones. It is approximately 140 m thick as measured in a single well of the Fort Liard area. The formation is conformably overlain by the Clausen formation and equivalent to the Etanda and Besa River formations. It equates to map unit 5 of Douglas and D.K.Norris (1959), map unit 30 of Douglas and D.K.Norris (1960) and to unit 1 of Patton (1958). In age it appears to equate, at least in part, with the Banff Formation of Alberta. In the District of Mackenzie the Yohin gradationally overlies the Besa River. The formation is limited to a relatively small area straddling the Yukon-British Columbia boundary and passes eastward into the Yohin Formation.

Relevance Due to minimal presence and the large distance of occurrence from the proposed well, it is expected that this formation is of limited relevance and not expected to be encountered.

Exshaw Formation (Upper Devonian to Lower Carboniferous) Offset Well Occurrence This formation occurs in 54 wells of the Fort Liard area.

Geology This formation is composed of a lower shale-dominated layer that is 9.3 thick and an upper siltstone/silty limestone layer that gradationally overlies the lower layer. The lower layer is anomalously radioactive, brownish black, sparsely fossiliferous and has a thin 10cm phosphatic, pyritic to sphaleritic, basal sandstone to conglomerate bed. Bentonite and tuft beds are commonly present. The upper layer is brown, medium to very thick bedded, sparsely fossiliferous and bioturbated. It is composed of

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calcareous and dolomitic siltstone with subordinate silty limestone in most of southern Rocky Mountains, while to the east it is grey shale grading up into siltstone, sandstone, silty limestone and skeletal to ooid lime grainstone and packstone.

In the central Rocky Mountains and farther north only the shale member is present. Southern Peace River Embayment both members are present

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 11-488 m, with an average thickness of 174 m. It is gradationally overlain by the Banff Formation, which grades laterally into it. In north-eastern British Columbia the Exshaw passes southwest-ward into the Besa River Formation.

Relevance Due to the proximity of the occurrence of the formation to the location of the proposed well and the amount of wells that the formation occurs in it is expected to encounter this unit in drilling.

Blackface Mountain Shale (Upper Devonian) Offset Well Occurrence This formation was only encountered 10 wells of the Fort Liard area.

Geology There is limited information concerning this formation, however, it is known to be a 366 m thick calcareous, dark grey and black shale and argillaceous limestone.

Relevance This is not a major formation and the occurrence of it is very minimal at best and not regarded as an important component as related to the targeted geothermal resource. It is expected that this formation is of limited to no relevance and, while possible, is not expected to be encountered.

Kotcho Formation (Upper Devonian) Offset Well Occurrence This formation was only encountered 15 wells of the Fort Liard area.

Geology This shale formation is light greenish grey to brownish grey, noncalcareous to slightly calcareous and contains locally occurring black, bituminous shale. Interbeds, near top and base of buff and light grey, largely argillaceous limestones, mostly in thin beds; lenses and nodules separated by greenish grey and brown shale; some bioclastic limestones interbedded.

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 90-440 m, with an average thickness of 352 m. The formation thins south-westward to the Fort Nelson area and grades eastwards, along a line close to the British Columbia-Alberta border, to limestone which cannot be discriminated from the upper part of the Wabamun Group of the Alberta subsurface and the Palliser Formation of the Alberta Rocky Mountains. It is overlain by black shales and dark brown, argillaceous limestones of Mississippian or Late Devonian age which may be equivalent to the Exshaw Formation

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Relevance This is not a major formation and the occurrence of it is very minimal at best and not regarded as an important component as related to the targeted geothermal resource. It is expected that this formation is of limited to no relevance and, while possible, is not expected to be encountered.

Tetcho Formation (Upper Devonian) Offset Well Occurrence This formation was only encountered 13 wells of the Fort Liard area.

Geology This limestone formation is light coloured and fine-grained with shale partings and becomes silty towards the base.

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 21-139 m, with an average thickness of 70 m. The formation is conformably overlain by the Kotcho Formation and conformably underlain by the Trout Formation. West of 123⁰W the shale equivalent is part of the Besa River Formation.

Relevance This is not a major formation and the occurrence of it is very minimal at best and not regarded as an important component as related to the targeted geothermal resource. It is expected that this formation is of limited to no relevance and, while possible, is not expected to be encountered.

Trout River Formation (Upper Devonian) Offset Well Occurrence This formation was only encountered 10 wells of the Fort Liard area.

Geology This formation has three major layers: the basal layer is composed of grey to light grey silty limestones; the middle layer above that is 11 m thick and is composed of grey silty limestones with shales; the top layer is a light grey finely silty, bedded limestone that is 18 m thick.

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 97-323 m, with an average thickness of 125 m. The formation is disconformably underlain by the Kakisa Formation with a depositional and faunal break; westward it is underlain by the Ft Simpson Formation. It is conformably overlain by the Tetcho Formation.

Relevance This is not a major formation and the occurrence of it is very minimal at best and not regarded as an important component as related to the targeted geothermal resource. It is expected that this formation is of limited to no relevance and, while possible, is not expected to be encountered.

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Kakisa Formation (Upper Devonian) Offset Well Occurrence This formation was only encountered 14 wells of the Fort Liard area.

Geology This formation is composed of varied lithologies: yellowish grey and olive grey quartzose and silty dolomitic limestone with argillaceous partings. Prominent bioclastic partings or reefoid biostromes and bioherms, composed largely of corals and stromatoporoids may occur at any horizon within the formation.

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 21-126 m, with an average thickness of 41 m. The formation is conformably underlain by the Redknife Formation and overlain by the Trout Formation.

Relevance This is not a major formation and the occurrence of it is very minimal at best and not regarded as an important component as related to the targeted geothermal resource. It is expected that this formation is of limited to no relevance and, while possible, is not expected to be encountered.

Fort Simpson Formation (Upper Devonian) Offset Well Occurrence This formation occurs in 19 wells of the Fort Liard area.

Geology This formation is composed of greenish to grey shale and mudstone that is variably calcareous, silty or sandy.

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 541-756 m, with an average thickness of 672 m. It is overlain by the Jean Marie Member and underlain by the Horn River Formation. Farther west, equivalent strata is part of the Besa River Formation.

Relevance This is a major and important formation; due to the proximity of the occurrence of the formation to the location of the proposed well and the amount of wells that the formation occurs in it is expected to encounter this unit in drilling.

Muskwa Formation (Upper Devonian) Offset Well Occurrence This formation occurs in 56 wells of the Fort Liard area.

Geology This formation is a black, bituminous shale with abundant pyrite.

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As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 9-577 m, with an average thickness of 292 m. The formation is a member of the Horn River Formation, underlain by the Otter Park Member and overlain by the Fort Simpson Formation.

Relevance While this is not considered to be a major formation, it has a relatively high occurrence regionally, appearing in many wells. However, locally (near the proposed well site) the occurrence of it is very minimal at best. It is expected that this formation is of limited to no relevance and, while possible, is not expected to be encountered.

Slave Point Formation (Middle Devonian) Offset Well Occurrence This formation was only encountered 10 wells of the Fort Liard area.

Geology This formation is a light yellowish brown to dark brown limestone interbedded with finely crystalline dolomite and thin shale laminae. Locally the formation has been recrystallized to coarsely crystalline dolomite. Stromatoporoids are locally abundant along the margin of the formation in north- eastern British Columbia and south Northwest Territories, facing the open marine shale facies (Otter Park Member) and around the eastern and southern edges of the Peace River Arch in northern Alberta.

As directly measured in the wells of the Fort Liard area, the range of thickness of the formation is from 81-125 m, with an average thickness of 104 m. In north-eastern British Columbia the formation is overlain by Horn River Formation. It is conformably underlain by Sulphur Point or Presqu’ile Formations.

Relevance This is not considered to be a major formation and occurrence of it in the offset wells is very minimal. It is expected that this formation is of limited to no relevance and, while possible, is not expected to be encountered.

Watt Mountain Formation (Middle Devonian) Offset Well Occurrence This formation was only encountered 9 wells of the Fort Liard area.

Geology This formation is composed of varied lithologies: red and green shales, sandstones, limestone breccia, anhydrite, dolomite and limestone. The sandstones are coarse-grained and arkosic near Peace River Arch and western Alberta Ridge and become fine grained and texturally and mineralogically more mature into the basin.

As directly measured in the wells of the Fort Liard area, the range of thickness of this thin formation is from 1-11 m, with an average thickness of 5 m. To the north the sandstones form a wedge which thins away from the arch and pinches out in a distance of 130 km in the Nipisi area. Southeast of the arch the Watt Mountain Formation is up to 29m thick. The sandstones thin and pinch out to the south and east of the Peace River Arch and east of the West Alberta Ridge. Beyond the pinchout of the sandstones the Watt Mountain consists largely of green shale, limestone breccia, anhydrite and dolomite that is present widely in Alberta, north-eastern British Columbia and Southern District of Mackenzie.

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This formation is considered by law to be the uppermost unit of the Elk Point Group. In central to northern Alberta it overlies the Muskeg Formation, and in most places the contact is sharp and unconformable. In northern Alberta and southern District of Mackenzie the formation sharply overlies the Sulphur Point Formation.

This formation has two components that give a characteristic gamma ray signature of the Watt Mountain Formation: one reflects the presence or absence of shale-filled cavities in the carbonates below the sub-Watt Mountain unconformity and another signals the presence or absence of detrital sediment, overlying the unconformity, that was derived from the Peace River landmass. Because of this thick sections of the Watt Mountain may represent either sediment-filled erosional channels or breccia- filled depressions on a dissolution surface and thin sections include only the argillaceous and sandy “brackish water” deposits of the overlying, basal transgressive sediments that wedge out to zero toward the northwest.

Relevance This is not considered to be a major formation and occurrence of it in the offset wells is very minimal. It is expected that this formation is of limited to no relevance and, while possible, is not expected to be encountered.

Sulphur Point Formation (Middle Devonian) Offset Well Occurrence This formation was only encountered 8 wells of the Fort Liard area.

Geology This formation is composed mainly of light buff to brown, non-skeletal and fossiliferous limestones with locally thin interbeds of green shales. Fossiliferous limestones occur along the flank of the Shekilie or Presqu’ile carbonate complex, over the basement highs or in places where the Sulphur Point overlies the Keg River reef build-ups. Fossiliferous limestones contain stromatoporoid, coral, stachyodes and amphipora fauna. The intra-organic pore spaces are generally infilled by a lime mud matrix, which results in a tight limestone facies. Locally the formation is altered completely to white, coarsely crystalline dolomite and thin, green waxy shales are commonly present in the upper part of the formation. The formation is locally composed of brecciated, fossiliferous limestone in a green shale matrix which appears to have been deposited along the flanks of the carbonate build-ups or shelf margin and grades southward to aphanitic limestone, evaporite dolomite, and anhydrite thinning to the southeast.

As directly measured in the wells of the Fort Liard area, the range of thickness of this thin formation is from 48-228 m, with an average thickness of 86 m. An unconformity separates the Sulphur Point Formation and underlying Pine Point and Muskeg formations. There is also a suggested disconformity between the Sulphur Point and overlying Watt Mountain. The dolomitized part of Sulphur Point is known as the Presqu’ile Formation.

Relevance This is not considered to be a major formation and occurrence of it in the offset wells is very minimal. It is expected that this formation is of limited to no relevance and, while possible, is not expected to be encountered.

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Pine Point Formation (Middle Devonian) Offset Well Occurrence This formation was only encountered 3 wells of the Fort Liard area.

Geology This formation is composed of dark, fine-grained bituminous limestone and limy shale. Later definitions of the formation include carbonate rocks of several facies.

This formation has a maximum thickness of 115 m and is gradational with the Chinchaga Formation below and Buffalo River Member above. It sits below (not directly) the Presqu’ile and Sulphur point formations.

Relevance This is not considered to be a major formation and occurrence of it in the offset wells is very minimal. It is expected that this formation is of limited to no relevance and is not expected to be encountered and is only included in this list as a formality due to having any presence in the region at all.

Presqu’ile Formation (Middle Devonian) Offset Well Occurrence This formation was only encountered within a single offset well: SHELL ET AL ARROWHEAD 2B-76, 302B766030122450. The coordinates of this well are 60.41879N, 122.97879W and the distance from the proposed well site is 31.56 km north.

Geology This formation is composed of coarsely crystalline dolomite and carbonate rocks.

The formation is approximately 191 m thick as measured in a single well of the Fort Liard area. The dolomitized part of the Sulphur Point Formation is known as the Presqu’ile Formation.

Relevance Due to minimal presence and the large distance of the occurrence of the formation from the proposed well, it is expected that this formation is of limited relevance and not expected to be encountered.

Muskeg Formation (Middle Devonian) Offset Well Occurrence This formation was only encountered 8 wells of the Fort Liard area.

Geology This formation is composed a sequence of interbedded and interfingering evaporite and carbonate rocks including salt, anhydrite, dolomite and limestone.

As directly measured in the wells of the Fort Liard area, the range of thickness of this formation is from 88-101 m, with an average thickness of 93 m. This formation overlies the Keg River Formation with a gradational contact and is disconformably overlain by Watt Mountain Formation. It is equivalent to Prairie Evapourite Formation to the south and to the Middle-Devonian Barrier Complex to the north (all

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or parts of Pine Point, Presqu’ile and Sulphur Point formations). The northern part of Elk Point Basin the upper part is entirely dolomitic or limestone.

Relevance This is not considered to be a major formation and occurrence of it in the offset wells is very minimal. It is expected that this formation is of limited to no relevance and, while possible, is not expected to be encountered.

Potential Zones Underlying the Zone of Interest These zones are observed to lie below zone of interest: the Nahanni and Manetoe formations. They are believed relevant due to their possible contribution to the water influx.

Headless Formation (Middle Devonian) Offset Well Occurrence This formation was only encountered 11 wells of the Fort Liard area.

Geology This limestone formation is buff-brown weathering, thin-bedded, fine-grained and argillaceous. As directly measured in the wells of the Fort Liard area, the range of thickness of this thin formation is from 10-36 m, with an average thickness of 24 m. This formation is conformably overlain by the Nahanni Formation and underlain by the Chinchaga Formation. Nahanni changes facies to shales of the Headless in the west of the type region (upper part of south facing cliffs on the Nahanni Butte (61 03’N, 123 37’W).

Landry Formation (Middle Devonian) Offset Well Occurrence This formation was only encountered 8 wells of the Fort Liard area.

Geology

This formation is composed of platform and dolomitized limestones that are poorly fossiliferous, medium-bedded and cryptograined. The upper part of the formation exhibits several facies changes, grading laterally into calcareous shales and argillaceous limestones of the Funeral Formation, the coarse-grained porous dolomites of the Manetoe Formation, the cryptocrystalline limestones of the Landry Formation or the breccias and anhydrites of the Bear Rock Formation.

As directly measured in the wells of the Fort Liard area, the range of thickness of this thin formation is from 55-91 m, with an average thickness of 73 m. This formation sits within the Nahanni, just above the Arnica, below the Headless and laterally beside (to the west) of Chinchaga (see Figure 10).

The Landry and Manetoe formations conformably overlie the Arnica throughout the Mackenzie Mountains.

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Appendix A Figure 1 - Regional stratigraphic chart and setting of the Manetoe Dolomite. "A" is behind the Slave Point edge and "B" is within the Selwyn Basin (Morrow, 2005).

Arnica Formation (Early to Middle Devonian) Offset Well Occurrence This formation was only encountered 15 wells of the Fort Liard area.

Geology This formation is composed of dolomite that is dark grey and brownish grew fetid, fine to medium crystalline, thick and well bedded. The lower part is distinctly banded with white dolomite laminates and dolomitized pelletal and intraclast packstones displaying a fenestral fabric and has alternating medium grey and dark grey beds, generally from 6 inches to 4ft thick which results in conspicuous banding. The upper part is more biostromal and is porous and vuggy in some places with chert nodules occurring.

As directly measured in the wells of the Fort Liard area, the range of thickness of this thin formation is from 65-252 m, with an average thickness of 120 m. This formation is conformably and gradationally underlain by the Sombre Formation. The Manetoe and Landry Formations conformably overlie throughout the Mackenzie Mountains. It may interbed with Manetoe at in Grizzly Bear Lake area.

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Delorme Formation (Lower Devonian) Offset Well Occurrence This formation was only encountered 2 wells of the Fort Liard area.

Geology This formation is composed of argillaceous limestones and calcareous shales that are thinly bedded and have a yellow-orange-brown and maroon weathering hue. The basinal equivalent of the formation is the Road River Formation.

As directly measured in two wells that are located directly beside one another, the formation is ~242m thick.

Bear Rock Formation (Late Silurian to Middle Devonian) Offset Well Occurrence This formation was only encountered 3 wells of the Fort Liard area.

Geology This formation is composed of orange-weathering, hoodoo forming, brecciated dolomite and anhydrite. The formation is subdivided into three parts: a lower section that is a white, weathering, gypsiferous lensing dolomite; a thin middle section that is indistinctly bedded grey dolomite and limestone; a thick upper section of dolomitic limestone breccia.

In outcrop the formation is almost entirely limestone breccia (no evapourites), while in subsurface it exists as a sequence of interbedded anhydrite and dolomite.

As directly measured in the wells of the Fort Liard area, the range of thickness of this thin formation is from 66-90 m. It is also cited to have a maximum thickness greater than 1500 m with most of its extent ranging from 305-763 m thick. It is unconformably underlain by the Mount Kindle Formation and is overlain by Hume Formation. Westward it passes to the Arnica, Landry and Manetoe formations, and southward to the lower part of the Chinchaga Formation. Northward it passes to limestone of the Gossage Formation.

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Appendix B: Additional Maps and Figures

- . ...., ."'GGtl-1 tltlllllllllllfllllllltlllllflllli

~~~- *_":.~~ .- ._.... _,,...... ,. "'''"'

t=---t~;. ~ ~~ L!!L

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I I t 1 I r I f I I I I I I I I 1.. .1 .... ~. -~.I I I I I I • I I I I I I I I I I Appendix B Figure 1 – Formation Pressures (psig) vs. Elevation (feet) graph (Ward, 1997).

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Appendix B Figure 2 - IPR curve based on a 5-year analysis showing that the initial formation pressure starts at 6,300 kPaa, and has an initial drop within the first 6 months to 6000 kPaa (Fakete Engineering).

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Well Name TVD Uncorrected Corrected Uncorrected Corrected & (km) BHT BHT Temperature Temperature (Well ID) (oC) (oC) Gradient Gradient (oC/km) (oC/km) N/A 0 0 0 0 0 Canada Southern Petroleum 4.4035 75 92 17.03 20.93 Ltd. N Beaver R YT I-27 (300I276010124000) Texaco Bovie Lake J-72 3.3632 157 174 46.68 51.87 (300J726020122450) Paramount et al. Bovie 3.22 158 175 49.07 54.37 C-76 (300C766020122450) Texaco Mobil Bovie Lake M- 3.083 143 160 46.38 51.78 78 (300m786020122450) Amoco S. Pointed Mountain 4.14 166 184 40.10 44.38 (D-1) L-68 (300L686020123450) Paramount et al Arrowhead 3.242 160 177 49.35 54.64 O-15 (300O156030123000) Purcell et al Liard F-25 3.1408 106 123 33.75 39.11 (300F256030123300) Purcell et al Liard F-25A 3.4331 157 175 45.73 50.85 (300F256030123301) Chevron et al Liard M-25 3.3823 137 154 40.50 45.68 (300M256030123300) Paramount et al Liard D-29 3.071 150 167 48.84 54.25 (300D296030123300) Amoco Pointed Mountain 4.5476 160 177 35.18 38.87 (B-2) F-38 (300F386030123450) BP Canada Energy Amoco A- 4.0472 156 174 38.55 42.95 4 Pointed Mountain A-55 (300K456030123450) BP Canada Energy Panam 3.757 141 159 37.53 42.31 Pointed Mountain K-45(A-2) (300A556030123450) BP Canada Energy Amoco 4.493 171 188 38.06 41.83 Pointed Mountain G-62 (300G626030123450) Cdn Forest et al Mount Coty 4.631 184 200 39.73 43.28 2K-02 (302K026020123300)

Appendix B Table 1 - Uncorrected and corrected temperature gradient data.

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Appendix B Figure 3 - Fort Liard area offset wells.

ADK/Borealis Geothermal Energy Project: Geological & Geothermal Energy Resource Assessment July 2011 Page 67 Appendix Figure 3 - Cross section A-C': wells K02-N80-P16. Appendix Figure 4 - Cross section D-C': wells F38-M25-P16.

Appendix B Figure 4 – Excerpt of the geological map of the Liard Basin including fault structures (Walsh, 2005).

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FAULT SYSTEMS

SEISMIC SHOTPOINT LINES

Appendix B Figure 5 - Seismic time contour map for the Mid Devonian (Ocelot Energy, 1997).

SEISMIC TIME CONTOURS

WELLS

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SEISMIC TIME CONTOURS

Appendix B Figure 6 - Seismic time contour map for the Mid Devonian (Amoco, 1974).

SEISMIC SHOTPOINT LINES

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